characterization of dairy value chain pakistan

8/13/2019 Characterization of Dairy Value Chain Pakistan

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Dairy Pakistan Livestock economy

Demand for dairy products Consumption of dairy products

Market demand

Consumption trends

Consumer preferences

Supply of dairy products Livestock inventory

Milk production & productivity

Milk production & productivity trends

Supply demand gaps for dairy products

Marketing of dairy products Milk and meat marketing

Hide, skin & wool marketing

Dairy supply/value and Constraints

Issues of dairy industry in Pakistan


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Background Livestock Economy

49.6% of agri. value added and 10.4% of GDP (>major + minor crops)

30-35 million rural population engaged in LST

farming

Livestock population

Cattle(29.6 mill.), Buffalo(27.3 mill.), Sheep(26.5

mill.), Goat (53.8 mill.), Others (4.84 mill.)

Livestock products

Milk(38Mt),Beef (1.24 Mt), Mutton (0.83 Mt),

Poultry meat (0.514Mt), Eggs (9.62 mln.),

Exportsabout 12% of total export earnings


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Demand for dairy products (ctc)Per capita consumption milk by provinces liters/month 2007

Item (Ltr) Punjab NWFP Sindh Balochistan Isd. All

Fresh milk cow 2.67 1.40 1.53 0.16 5.50 2.19

Fresh milk

buffalo 8.27 3.96 6.23 4.59 0.00 6.38

Fresh milk mix 0.59 1.77 0.05 0.10 0.00 0.57

Pasturized milk 0.05 0.18 0.08 0.00 0.47 0.10

UHT milk 0.90 1.10 1.15 1.18 3.21 1.15

Infant formula 0.00 0.02 0.00 0.00 0.06 0.01Powder milk 0.04 0.05 0.06 0.02 0.10 0.05

Flavor milk 0.00 0.00 0.00 0.00 0.01 0.00

Total milk 11.76 7.60 7.93 4.95 5.60 9.36

Source: FAO 2007


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Demand for dairy productsPer capita consumption of dairy products(liter/month) 2007

Per capita consumptionper month (liter) Low Middle High AllYogurt fresh 0.62 1.04 0.98 0.89

Yogurt UHT 0.05 0.09 0.28 0.12

Flavoured Yogurt 0.00 0.00 0.01 0.00

Cottage Cheese 0.00 0.00 0.01 0.00

Processed Cheese 0.00 0.00 0.01 0.00

Butter(Fresh) 0.03 0.07 0.07 0.06

Butter (Processed) 0.01 0.07 0.09 0.06

Khoyia Quantity 0.00 0.03 0.04 0.03

Sweet/Desert 0.00 0.02 0.03 0.02

Desi ghee 0.04 0.07 0.06 0.06

Cream Quantity 0.01 0.01 0.03 0.02Ice Cream Quantity 0.03 0.08 0.16 0.09

Rubbery consumption 0.00 0.00 0.00 0.00

Malai Quantity 0.00 0.00 0.00 0.00

Lassi Quantity 0.00 0.03 0.00 0.01

Liquid Milk Equivalent

Per Month (LME)

11.58 16.42 19.66 15.66

Note:LME includes both all types of milk and milk products

Source: FAO 2007


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CategoriesPer capita/

annum (LME)Urban population

(m)Urban demand for

LME (b)

Province /FederalPunjab 205.26 33.61 6.90

Sindh 174.64 13.89 2.43

NWFP 156.17 8.10 1.26

Balochistan 155.97 2.99 0.50

Islamabad 224.87 0.37 0.08

PAKISTAN 187.89 60.41 11.35

Urban Demand for LMELiters 2007

OVERALL DEMAND FOR MILK IN PAKISTAN

Urban milk consumption =188 liters/capita/yr

Overall milk consumption = 211 liters/capita/yr

Population = 160 million

Demand for milk = 33.76 bl liters/yr


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PER CAPITA CONSUMPTION TRENDS (Kgs)

Countries Meat Milk

1983 1993 2007 2020 1983 1993 2007 2020

Developed 74 76 - 83 195 192 - 189

Developing 14 21 - 30 35 40 - 62

Pakistan 11

65

>

211 245

>

(FAO, 2003, ILRI 1999)

Messages: Meat consumption will be higher in 2020 than DC

Milk consumption is higher than DC but gap would

increase further


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PER CAPITA CONSUMPTION TRENDS (Kgs) .

Diversification of diets meats, eggs and dairy products

Population growth, urbanization and income growth

Derived Demand -- creating a veritable livestock revolution

New and expanding markets for small livestock producers

However, inappropriate policy and misallocation of

investment resources could skew the distributionof benefits

and opportunities

demand for livestock products will lead to intensification ofsmall holders food and feed production system and may

provide an engine for sustainable livestock production


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Consumer Preferences for Fresh Milk (% Responses)

Preferences Cow BuffaloTaste 11 31

Good Quality 18 19

Low Price 19 15

Family Choice 11 9

Easy Availability 14 7Freshness 7 8

More Nutritious(fat) 9 4

Good for Drink 3 2

Good for Tea 7 2Good for Dessert 0 2

Other (SP) 0 1Low Spoilage 2 0Sample HHs=2616 Pb=1224 Sd=407 NWFP=679 Bl=155 Isbd=151

Source: FAO 2007


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Preferences

Provinces

OverallPunjab NWFP Sindh Baloch.Islam-abad

Good Quality 22 17 23 12 27 22

Taste 20 13 28 30 20 21

Good for Tea 10 9 13 13 17 12

Easy Availability 11 15 4 21 9 10

More Nutritious (fat) 7 12 8 6 7 8

Family Choice 9 2 5 4 6 7

Low Price 5 13 3 1 2 5

Good for Drink 2 0 6 6 6 3

Low Spoilage 1 3 5 1 2 2

Good for Dessert 1 2 1 5 0 1

Freshness 0 1 0 1 1 1

Sales Promotion 0 1 0 0 0 0

Other (SP) 11 14 2 0 2 8

Consumer preferences for UHT Milk (% Responses)

Source: FAO 2007


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Responses for market types for fresh milk (%)

Market Types Punjab NWFP Sindh B.tan All

Home Delivery 68 67 69 56 68

Sales Point 21 14 6 6 15

Grocery/General Store 0 3 3 18 3

City Centre 0 1 0 1 0

Local Market 5 5 17 16 9

Own Animal 4 1 3 1 3

Others(Dairy Farm) 1 9 2 2 3

Source: FAO 2007


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Awareness responses about milk adulteration (%)

Adulterants

ProvincesOverall

Punjab NWFP Sindh Baloch. Islamabad

Awareness Yes%) 68 78 76 75 80 75

Dirty water 84 67 78 84 85 75

Ice 8 17 9 8 8 11

Surf 3 0 1 3 4 2

White cement 2 2 0 2 3 2

Oil 1 1 0 1 - 1

Corn Flour 1 9 7 1 - 8

Other 1 4 5 1 - 2

Source: FAO 2007


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Livestock Inventories, 2006 (million)

Country/

province

Cattle Buffaloes Sheep Goats Others Total

Pakistan 29.56 27.33 26.49 53.79 5.69 142.86

Punjab 14.48

(49)

17.76

(65)

6.36

(24)

19.90

(37)

2.65

(47)

61.16

(43)

Sindh 6.80

(23)

7.38

(27)

3.97

(15)

12.37

(23)

1.36

(24)

31.89

(22)

NWFP 5.91(20)

1.91(7)

3.44(13)

9.68(18)

0.76(13)

21.71(15)

Balochistan 2.36

(8)

0.27

(1)

12.72

(48)

11.83

(22)

0.91

(16)

28.10

(13)

Agriculture Censes, 2006

Figure in parenthesis are percentage


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Livestock Population growth trends

01000020000300004000050000

1955 1960 1972 1976 1986 1996 2006CENSUS YEAR

POPULATION(00

0)

CattleBuffaloesSheepGoats

Source: Economic Survey of Pakistan, 1955-2006

C>B in beginning of 1955; C>B reached peak in 1960; B>C in 1996

but in 2006 C>BSource: Hasnain & Khan 2007


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MILKING POPULATION, 2006

Animals Pakistan Punjab Sindh NWFP Baloch.

Cow > 3 years 15.16 7.376

(49)

3.656

(24)

3.038

(20)

1.086

(7)

In milk cows 8.72 4.05

(46)

2.143

(25)

1.87

(21)

0.6526

(7)

Buffaloes > 3

year

15.56 9.896

(64)

4.393

(28)

1.090

(7)

0.184

(1)

In milk 10.22 6.233

(61)

3.051

(30)

0.808

(8)

0.130

(1)

Agriculture Censes, 2006

Figure in parenthesis are percentage

(Million)


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Milk production by provinces 2006

Punjab

22.50

58 %

Bal

1.18

3.1%

NWFP

4.48

11.6%

Sind

10.19

26.3%

38.37

Source: Economic Survey of Pakistan 2006-07


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Milk production trends by species

Type ofanimal

Gross annual production (Billion Liters) % Change Between

1986 1996 2006 1986&1996 1996&2006

Cows 7.07 9.36 13.33 32.4 42.4

Buffaloes 14.82 18.90 25.04 27.5 32.5

Total 21.89 28.26 38.37 29.1 35.6

Goats - - 0.32 - -

Source: Economic Survey of Pakistan 2006-07

Ave. Annual Lactation length of 250, 305 and 50 days for cows, buffaloes and goats

MILK PRODUCTIVITY


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MILK PRODUCTIVITY

Years No. of dairy

farms

(million)

Average milk

animal/farm

T. milk/farm/yr) L. milk/

Animal/yr

1996 11.3 1.9 2.37 1247.4

1998 11.9 1.8 2.36

2000 12.7 1.8 2.35

2001 13.0 1.8 2.35

2002 13.4 1.8 2.35

2003 13.8 1.8 2.34

2004 14.2 1.8 2.342005 14.7 1.8 2.34 1300

G. Rate %

(2000-05)

3.0 -0.4 -0.1

IFCN, Dairy Report, 2007: Farm growth nearly stable


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ENERGY CORRECTED MILK PRODUCTVITY

Years Milk production

(mill.t)

Cows &

buffaloes

(in million)

Milk yield

(t/cow/yr)

1996 26.6 20.9 1.27

1998 28.1 22.0 1.28

2000 29.7 23.3 1.28

2001 30.6 23.8 1.28

2002 31.5 24.5 1.29

2003 32.4 25.1 1.29

2004 33.4 25.7 1.30

2005 34.4 26.4 1.30

G. Rate % (2000-05) 2.9 2.5 0.4

IFCN, Dairy Report, 2007: ECM = Energy Corrected Milk with 4% fat and 3.3% protein


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Milk production kgs/animal/lactation

Country Cattle BuffaloBangladesh 207 407

Bhutan 257 400

India 987 1450

Nepal 415 850

Pakistan 1195 1909

Siri Lanka 627 496

Australia 4926New Zeland 3947

Australia 4926

PDDC 2006


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Production trends of dairy products

Economic survey of Pakistan 2006-07

KEY FEATURES OF MILK PROCESSING SECTOR 2005


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KEY FEATURES OF MILK PROCESSING SECTOR, 2005Processors Capacity

(millionliters)

Capacity utilization AveragemonthlyFlush Lean

Nestle 1.3 1.3 0.78 1.04

HFL 0.9 0.9 0.54 0.72

Milac 0.3 0.3 0.18 0.24

Vita 0.05 0.03 0.018 0.024

Halla 0.15 0.15 0.09 0.12

Prime 0.1 0.1 0.06 0.08

Nurpur 0.15 0.15 0.09 0.12

Nirala 1 0.1 0.6 0.08

Dairy crest 0.15 0.15 0.09 0.12

Engro 0.35 0 0 0

K&K 0.4 0 0 0

Butt Dairies 0.06 0.06 0.036 0.048

Munno Daires 0.02 0.02 0.012 0.016

Khi Dairies 0.1 0 0 0

Military 0.18 0.18 0.108 0.144

Total 5.3 3.44 2.064 2.752PDDC 2006


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MILK PROCESSING AND PRODUCTS, 2006 Fresh & dry milk processing plants = 24

Large = 16 Medium = 2 Small = 1

Fresh milk processed (buffalo & cows) = 992 mln. liters Dry milk used = 12.5 mln.kgs Dairy products

UHT milk = 472.2 mill. liters Low fat milk = 10.90 mill. Liters High fat milk = 28.80 mill. Liters Pasteurized milk = 5.20 mill. Liters Flavored milk = 3.20 mill. Liters Powder milk = 37.40 mill. Kgs Condensed milk = 1.70 mill. Kgs Milk cream = 26.60 mill. Kgs Yogurt = 10.10 mill. Kgs

Butter = 4.70 mill. Kgs No. of persons employed = 5653 personnel

Ratio of fresh milk processed with net milk

production from buffalo and cows = 3.23%

Agricultural Censes Commissioner, 2007


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Demand and supply situation in Pakistan

40

50

60

70

80

90

100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Months

Indexofproductionand

consumption

40

50

60

70

80

90

100

Indexofproductionand

consumption

Demand Supply + water Supply

Excess supplyconverted to

ghee, khoya,butter, powder etc

Water

Reconstituted

+ powder

Excess demand met byreconstitued powderand diluted milk

Excess supplyconverted to ghee,Khoa, butter, powder etc

Source: Hasnain & Khan 2007


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Rural

Commercial

Assembler

Peri Urban

Producer

(15%)

Rural

Subsistence

Retail

Milk Shop

Rural Producer

(80%)

Urban Producer

(5%)

80%5%

15%

20%

Bakers

Confectioners

5%

Wholesaler

10% 90%

5%

90%

ProcessingPlants

5%

10%

Wholesale market

100%

Retail Store Consumer100% 100%

15%

85%100%

85%

MILK MARKETING CHANNLES

FAO, 2003

Improper milk collection system, Un-hygienic milk handling & Adulteration

DAIRY SUPPLY CHAIN


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DAIRY SUPPLY CHAIN

Urban Dairy Markets (Demand Perspective) Home delivery/gawalas- 68 percent urban consumer

reported that they are getting milk at home through milkmen/Gawalas

Milk shops/retail shops - 16% purchased milk from localretail milk shops/milk shops

Milk sale points- 10% purchase milk from these sale points

General stores/super markets- 4% from these general

stores and the super markets

Own animals- Only two percent of urban consumers get milk fromtheir own animals in big cities, cities and towns


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Participants of dairy supply chains

Milk producers: 8 m FHHs with herd size 50 m milch animals, spread across1000 sq.km- 43% with 1-2 animals, 28% 3-4 animals-Producing 80% milk.

Milk collectors (Dhodies): SSMC-200-400 kg/day from remote areas,long term contracts at predetermined price offering a share of milk price in advance. MSMC-400-800 kg/day with a similar manner, carryout door to door milk delivery and sell in somenearby market. LSMC- > 1500-3000 kg/day, purchase from SSMC & MSMC, sell to retailshops, adulteration is practiced by LSMCs

De-creamers and khoya markers:milk men stay withdecreamers & Khoya makers on way to town/cities. Some SSMC sell milk todecreamers, decreamers sell part to halwaies & confectioners

Milk processors: small share

Consumers

Government organizations: PDDC, PDDB, AHComm. (Fed),L&DDD (Prov). PSDP-Project (Milk collection processing dairy production and dev.Program)-Subsidized livestock services for milk collection and marketing,development of genetically superior animals


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Fresh milk supply chain for milk collectors

Rural DairyProducers

(Rs. 16-18/kg)

Small ScaleMilk

Collectors(Rs. 18-22/kg)

Medium ScaleMilk


Large ScaleMilk


Urban

Consumers

Milk Shops/ SalePoint (Rs. 24-

35/kg)


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Constraints Associated in Retail FreshMilk Supply Chain

The product sub-system: Poor quality milk (poor milk production system, poor skills of

handling, storage and transport system of unhygienic milk).

The quality of milk is deteriorated with the use of adulterant bymilkmen.

The Information sub-system:

The absence of effective market information flows within the milksupply chain inhibits feedback from the market apart from priceinformation which is determined with the supply and demandsituation.

The Value sub-system:

There is a variation in the prices at the producer, milkmen and milk-shop. There is no system at all to control milk quality.

The Governance sub-system:

The dominant role of milkmen may be reduced by enhancing theshare of processed milk.


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The Domestic Retail Processed Dairy supply Chain


(Rs. 16-18/kg)

Third partycollection oncommission

basis (Rs. 2/kg)

Self collectionon the basis of

fat (Rs. 5/kg)

Collection,processing,

packing anddistribution

charges about

(Rs. 19-22/kg)

Urban

Consumers(Rs. 42/kg) for

different brands


(Rs. 16-18/kg)

Third partycollection oncommission

basis (Rs. 2/kg)

Self collection

on the basis offat (Rs. 5/kg)

Collection,processing,

packing anddistribution

charges about

(Rs. 19-22/kg)

Urban

Consumers(Rs. 42/kg) for

different brands


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Constraints of Retail Processed Milk Supply Chain

The product sub-system:

Consumers complaints about the taste of processed milk(unhygienic handling, storage and transport system ofmilk collected by third party adulterants by third party).

The Information sub-system:

The absence of effective market information flows withinthe milk supply chain inhibits feedback from the marketapart from price information.

The Value sub-system:

There is no price variation for different brand of milk

The Governance sub-system:

Multinational and private companies charges too much forthe collection, processing packing and distribution highprice.

Supply/Value chain for Smallholder Milk


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Supply/Value chain for Smallholder MilkFarms

World Bank 2006

11 buffalo farmFarm gate price =US$ 16.70/100kg

Cost of production =US$10.76/100kgProfit = =US$ 5.93/100kg


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Allocation of development funds for livestock projects

Pakistan Total Cost %age of total Projects #

Fed Govt 5.28 27.8 7

Punjab 6.62 34.8 27

NWFP 0.89 4.6 11

Baluchistan 0.26 1.3 16

Sindh 5.93 31.2 21

Pakistan 18.98 99.7 82

Federal Govt.: one project costing Rs. 199 million is donor assisted (EU), 1 is project on

Avianinflunza, 2 on health components, 1 on animal production

Bulk of funds (83%) goes to thee Dairy, Meat and extension

Punjab Govt. out of 27 projects 16 (86% funds) on animal production aspects, 6 on animalhealth, the largest project is on establishment of milk processing plants and milk collection

centers at Layya and Sialkot costing 1.15 billion rupees

NWFP Govt. out of 11 projects 5 on animal production and on animal health

Balochistan Govt. out of 16 projects 9 on animal production, on Vet. Facilities

Sind Govt. 87% funds fo animal production with very little for animal health

ISSUES OF DAIRY PAKISTAN


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ISSUES OF DAIRY PAKISTAN Poor quality of fresh milk & high price of processed milk

How quality fresh milk and cheaper processed milk can be ensured to consumers?

Small scale and subsistence dairy farming system (80% of milk) How participation of SF in modern value chain be guaranteed?

Limited physical farm performance:Poor genetic andreproductive efficiency, epidemics of infectious diseases,inadequate feeding and ineffective vet. Cover-- low milk yield

Week financial farm performance:Low milk prices,constraints on milk marketing and distribution

Underutilization of dairy industry as at present working at 50%of installed capacity processing only 3.23% of milk.

Institutional and regulatory issues:Poor investment ininfrastructure, establishment and implementation of livestocklegislation

There is need to Clarify the issues that are holding back dairy industry

development and role of government


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OBJECTIVES OF THE PROJECT

To assess the effects of verticalcoordination on transaction costs and farmprofitability of smallholders in dairy,horticulture and poultry sectors

To identify different forms of integrationthat could sustainably improve wellbeingof small holder farmers in dairy,horticulture and poultry value chains

To determine the policy implications forsmallholders, agribusiness, public policyand investment priorities.


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METHODOLOGY

Field surveys(sampling and questionnaire

development)

Analytical techniques - The Value chainapproach

Transaction cost SCP of value chains for HVA

Logit model for participation assessment ofsmallholders/effects of value chain on

smallholders SWOT analysis by ranking techniques for

strategic options to integrate the smallholdersinto value chains


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Sample DistributionItems Dairy

PRODUCTION & MARKETINGi) Multinationalii) Cooperative/ Associationsiii) Domestic-Private Sector

Contact FarmersNon-Contact FarmersTotal Farmers

200200200

600300900

PROCESSORSCONSUMERS

101200

PROPOSED CASE STUDIES

Commodities Multinational Coop/Growers

associations

Domestic-Private sector

Milk Nestle Halla Haleeb, Noon, Chaudry dairy etc.

S li C i i


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Sampling CriteriaMulti-national Nestle

Sheikupura & Kabirwala:Nestle milk area; 100 km radius; 20villages 10 regular milk supplier to Hella and 5 non-contact = 300)

CooperativeHella

Kasur & Okara:Hella milk area; 100 km radius; 20 villages; 10regular milk supplier to Hella and 5 non-contact = 300)

Privatesector Jhang & Sargodha:Dairy Choudhry milk area; 100 km radius; 20villages 10 regular milk supplier to Halla and 5 non-contact = 300)

Dairy Sector


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Expect Impact of Research

The proposed research is expectedto contribute to an increasedunderstandings of value chains forHVA products in Pakistan; to providenew ideas for improving theintegration of smallholders, smalland medium enterprises, and the

smallholders with value chains andto assist in policy dialogue related tomaking markets work better for thesmallholders.


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Expected Output Analytical papers contributing to an increased

understanding of value chains for HVAP Specific output for Policy Implications:

Policy directions to strengthened vertical linkages forgreater involvement of SF in the process of cutting downtransaction costs and improving marketing efficiency

Needed policy changes for promoting supper marketsand retail food chains to benefit SF and consumers

Needed policy changes for investment opportunities invalue chains, instt. Building and infrastructures

Assist in policy dialogue to make agri. Markets work

better for small farmers


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characterization of dairy value chain pakistan

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