Dairy farming faces big crisis amid invasion of cheap powder milk

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Mushir Ahmed
The country's march towards white revolution has suffered a severe jolt as a massive slump in price of imported powdered milk and low taxes put the dairy industry on a life support.
Over the past couple of weeks hundreds of farmers threw tonnes of liquid milk on highways in the main dairy hubs in Pabna and Sirajganj in a mark of protest never seen in the country before.
Farmers said an invasion of cheap powdered milk from India and other parts of the world meant there are now fewer buyers for their liquid gold, forcing the poor villagers to resort to the 'suicidal' action.
"We used to sell our milk at Tk 32-35 per kilogram even a couple of months ago. But now some companies have lowered the rate to Tk26.5 per litre, while some have stopped buying altogether," said Nurunnaby Saimum, head of a dairy farmers' cooperative in Pabna.
"If there is no buyer for our milk, there is no point in raising cows. Hundreds of thousands of farmers will have no choice but to give up farming," he warned.
Senior officials of top dairy companies have admitted that the country's dairy farming is facing the "biggest threat to its survival", putting at risk the lives of millions of poor farmers.
They said the crisis began when the price of powdered milk came down to US$2000 a tonne last month after sky-rocketing to $4,500 in June-July last year.
Initially, the record price of imported milk in 2007-8 brought a boom time for the country's dairy farmers as for the first time they could sell milk cheaper than the powdered alternative.
"As a result, some small dairy companies, sweet, biscuit and ice-cream makers dramatically increased purchase of liquid milk from local producers in Pabna, Sirajganj and other areas," said
Mohammad Ali, a general manager of Aarong Dairy.
The price of per litre pasteurized or ultra-heat treated milk also shot to a record 50 taka as companies and industrial users scrambled for liquid production.
The country's milk distribution companies buy some 300,000-350,000 litres milk a day --- a fragment of Bangladesh's total daily demand--- with state-owned Milk Vita buying 50-60 per cent of the production.
To cope with sudden spike in demand, thousands of villagers took up dairy farming, without realising that their survival depends on the caprice in global milk market, said Altaf Hossain, an ex-general manager of Milk Vita.
"So once powdered milk price plummeted by 60-70 per cent and flooded Bangladesh market, industrial users simply stopped using liquid milk," said Ali.
Locally produced milk consumption dropped sharply, affecting daily purchases at the dairy hubs, he said.
Ali said despite the fall Aarong kept its purchase level at 75,000 litres per day, although the company is finding it difficult to sell its own powdered milk, which costs Tk350 per kilogram, some 75 percent higher than the imported one.
A.Z.M Sayem, a consultant of Akij Dairy, said smaller companies especially those who sell ultra-heat treated milk also cut their marketing because of the un-equal price war.
"There is no way we can compete with imported powdered milk. We have to cut our purchase to 2000-3000 litres a day due to declining demand for liquid milk," he said.
Sayem and Ali blamed a 40 percent cut in taxes on imported powdered milk for aggravating the crisis.
"Last year the government cut the taxes from 75 per cent, believing that it would ease prices of imported powdered milk," he said.
"But since the price has come down too low due to the global recession, the government should now immediately raise high taxes to protect millions of local farmers," he added.
Although companies have said they are not to blame for the crisis, the government-owned Milk Vita and some farmers have pointed the fingers at them.
"Companies like Akij, Pran don't have contract farmers. They collect milk when the price is right, but departs the scene once things go wrong, leaving the farmers in the lurch," said M.A Barek, general manager of Milk Vita.
Milk Vita has over 200,000 contract dairy farmers throughout the country and collects some 210,000 litres of liquid milk a day.
"Since the crisis unfolded last month, we have been buying increased amount of milk from the farmers. But we can't buy milk from everyone," he said.