Category Archives: Dairying

The Milk Crises 2015 – Fracturing the backbone of the Indian Dairy Sector

Expand, grow, consolidate and let’s join the Big Boys! This is the mantra that Indian policy makers (politicians and their advisors) have been chanting. For over 20 years now they have been telling us that unbridled growth, urbanisation and deserting rural landscapes are the only way out of poverty. Reality on the ground: more malnutrition, unemployment, greater deprivation, violence, debt-ridden rural families, fractured education system, regressive governance. The latest casualty of this environment is the Indian Dairy Sector – a sector that was touted as the sunshine sector of the liberalised India.

While our mainstream news reporters and political spokespersons are distracting us with their ludicrous shenanigans there is a massive milk crises unfolding in the country. A crisis that is threatening to destroy (for the first time) the “resilient” people’s milk market. Today India is the world’s largest producer and consumer of milk and its backbone are the millions of small dairy farmers across the country. The domestic dairy sector even today is dominated by what is termed the “informal market” which is really the people’s market built by small farmers, milk vendors, cooperatives. A vibrant market built on experiential knowledge and resilient local cycles of production and consumption.

However as the Government’s chant of Bigger is Better grows more and more strident this resilient sector is facing a grave crisis. In May 2015, we at the Food Sovereignty Alliance were alerted to the crises by our member farmer sanghas from Chittoor in Andhra Pradesh and Medak in Telangana. As we tried to understand the depths of the crises it rapidly emerged that this is not just a crisis for small dairy farmers in A.P and Telangana but one that is engulfing farmers across the country.

Further research showed us that the crises was global! Small farmers in the EU, UK, US were suffering the same fate. The crux of the crises in India and globally is – the price at which milk is being procured by dairy processors from small farmers is much lower than the cost of production of one litre of milk. This is driving farmers deeper and deeper into debt.  This is in spite of the fact that farmers in the EU, UK and US have tremendous Government support. In India there is no safety net for these small farmers. Neither State nor the Central Government have taken any serious action to protect small farmer livelihoods since the onset of the crises.

In the UK and Europe mainstream media is highlighting this as a global dairy crises and some are even saying that “the crisis is too important to be left to the market.” To quote a recent piece from the Guardian “Being at the whim of the world’s commodity markets means a farmer in Cheshire is vulnerable to a fall in demand from China, and Russia’s ban on EU food imports in retaliation for Brussels-imposed sanctions”. This is going to be India’s reality very soon – a farmer in Chittoor is vulnerable to a fall in global skimmed milk prices triggered by China and Russia’s import bans or by Europe’s dumping of excess dairy products.

India’s dairy sector unlike that in the EU, UK and US was and is dominated by the “people’s market”. This made it resilient providing an assured source of livelihood for the small dairy farmers. As the Government aggressively tries to integrate the sector into the global market, lives and livelihoods of these small farmers are becoming increasingly vulnerable. If India continues on this course, small farmers will be destroyed. This is extremely serious given the agrarian distress that the country is facing. In a situation when livelihoods based on agriculture are becoming unpredictable, due to erratic weather patterns, dairying is the one hope for these small farmers.

In an effort to bring attention to this crisis and chalk out a strategy for a way forward, the Food Sovereignty Alliance convened a dialogue of farmers’ groups on October 21, 2015 at Chennai. Farmers’  Groups from Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, representatives of the South Indian Coordination Committee of Farmers’ Movements and the Bharatiya Kisan Union participated in the dialogue. Details of the dialogue and proposed next actions are available at the Food Sovereignty Alliance’s blog.

This crisis is not one for the farmers alone. It is our crisis. All of us as global citizens must begin to ask ourselves at least a few questions – Where does our food come from? Are we drinking real milk? What goes into producing our food – vegetables, fruit, milk, meat, eggs, fish? Who makes it possible for us to eat? If we don’t then we will be party to the destruction of the lives and livelihoods of these small farmers and then where will our food come from?

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The Myth of Food Inflation – The Reality about Milk

There is a myth that is being perpetuated about the rising food prices which needs a serious reality check. Policy papers, Government reports, policy briefs by international development agencies constantly declare that the rise in per capita income in India has led to a rise in demand for high value products such as milk and milk products. The article in the Hindu Business Line, July 6, 2012 by Sthanu Nair and Leena Mary Eapen has provides valuable insights into this myth but does not speak adequately to the pricing fiasco that is prevalent in the market. Let’s look at the reality on the ground from the supply side as far as milk is concerned. The information provided below are facts based on the writer’s personal work with small and marginal farmers in a rain fed community in Rayalseems. The reason the reality is embedded in small and marginal farmers is because they contribute to 80% of the milk production in this country.

Fact 1: Cost of milk production in rainfed areas by small and marginal farmers can range from Rs. 19 per litre to Rs. 25 per litre depending on asset ownership. Farmers with land and access to water typically incur a lower cost of production than landless farmers with dairy cows.

Fact 2: Those who have exotic crossbred cattle (Holstein Friesian particularly) thrust upon them through Government subsidy and loan programmes (be it through women’s SHGs or other schemes) will incur high medical costs and high resource costs (water, feed, fodder). This is because these cows are not hardy like the native breeds and are susceptible to disease. In addition like the Green Revolution crops they require a lot of water – for drinking, washing and indirectly for green fodder. Small and marginal farmers owning these cattle are entrenched in debt-traps having to continuously service the loans which adds to the cost of milk production. (For more on the saga of exotic breeds and indigenous breeds see: http://www.downtoearth.org.in/content/loss-our-breeds).

Fact 3: This summer (2012 summer) the Syndicate of private dairies fixed prices as low as Rs. 16 to 18 per litre for wholesale purchase of milk. The prices were slashed from the winter rates of Rs. 19 to Rs. 21 per litre. The situation for the farmer is exacerbated since summer is when the cost of milk production is even higher due to lack of green fodder and inadequate water. This drives the farmer deeper into debt since the income from the sale of milk is significantly less than the cost of production of milk. The rationale provided by the dairies for the slash in prices in summer was a milk surplus.

Fact 4: Price of pasteurised milk in July in Andhra Pradesh however increased to Rs. 32-34 per litre for toned milk and Rs. 40-42 per litre for whole milk.

Given the facts above, Where is the supply constraint if there is a surplus?

Farmers are producing milk that meets the quality requirements in terms of fat and solids not fat (SNF), volume is being produced on the back of debts by these farmers, retail price of milk is shooting through the roof so Why are farmers and consumers the ones who are being hit?

The reality is that there is no supply constraint but it is the cartel of dairies and skewed Government policies on milk pricing that is placing both the farmer and the consumer in this “pseudo inflation” situation. Unless Government policies crack down heavily on regulation of milk prices people at two ends of the spectrum will continue to suffer – at one end the farmer who is going to run himself / herself to the ground entrenched in debt and at the other end the consumer whose income will never be enough.

The only entity in this that I can see is the winner is the milk processor and the policy makers who are blissfully oblivious of the ground reality.

Truly, if food consumption patterns have shifted and if there is a domestic demand shouldn’t the small and marginal dairy farmers at least be able to make both ends meet? Where is the inclusive growth and development in this scenario?


The Milky Way……caught in the Chakravyuha

We’ve all read / heard extensively about how the White Revolution or Operation Flood changed the face of milk production in India. Small milk producers in Gujarat and the rest of the country found their voice through the cooperative movement. More than 30 years after that “revolution” India is still the largest milk producing nation (17% of the world’s milk production according to NDDB reports from 2010-2011) but the small milk producers who contribute to 80% of the milk production in India are in debt traps and not a part of cooperatives that support livelihoods (for an incisive report on small farmers and global milk production see – http://www.grain.org/entries/4426-the-great-milk-robbery). What has happened?

As in agriculture so in dairying – skewed Government policies have contributed extensively to this situation. Exotic breeds of cattle more at home in the temperate climes of Western Europe were indiscriminately introduced into the country with the promise of 25-30 litres of milk production/day by each animal. Government programmes drove this into the homes of small farmers through captive channels like the women’s Self Help Groups. These resource intensive animals which require huge amounts of green fodder (grass), feed, water (for drinking and to be kept cool in the torrid heat of the Indian summer) became “white elephants” in the homes of small farmers. Not only did they require resources in the form of water and food but their medical costs were very high because these animals were more susceptible to diseases in the tropical conditions where they were introduced – purer the breed more susceptible it is to disease! In addition, cross-breeding them with native, hardy breeds led to destruction of the local gene pool of native cattle breeds. E.g., the Gir cow, a native of the Gujarat area, that reportedly produces 48-50 litres milk / day has pretty much vanished from India. The irony is that today we are importing the semen of the Brazilian Gir, which was developed locally from stock imported from India early last century, to revive the local Gir!! (see http://devinder-sharma.blogspot.in/2010/09/holy-cows-acclaimed-abroad-despised-at.html).

This fascination with exotics has wreaked havoc on the largely rain-fed countryside with farmers being driven into debt traps. What has made the situation even worse is the pricing of milk. Most small farmers are pouring their milk to Government dairies where the price offered for milk has no relationship to the expenses incurred by the farmer in producing the milk. So the small farmer who is struggling to maintain this “white elephant” with the hope that it will produce the “promised” milk and bring money into the house is left watching the money slip from the dairy to the bank /money lender…..with this skewed price all he / she is doing is servicing loans. Where is the promised livelihood or “poverty alleviation” from dairying???

Summer is usually the time when milk demand is high and milk supply falls (lack of water and therefore not enough grass to feed the cow and so low milk yield). However this summer in parts of Chittoor and in Karnataka, milk availability has been high…why I am not sure. However, as a result Government dairies have a surplus and to disincentivize farmers from producing milk, dairies have slashed milk prices! The cow’s udder is not a tap that can be shut off! How will these small and marginal farmers particularly in rain-fed areas reeling with drought pay off those loans if they cannot sell the milk produced? The very same Government departments and dairies who promised loans and pushed small farmers into buying exotic cross-breeds (no subsidy if you do not buy a cross-breed!) do not want to touch the milk.

When is the Government and the Planning Commission going to wake up to the ground realities? Why are there no subsidies and no insurance facilities provided for local, hardy breeds of cattle? Why is the price of milk not linked to the cost of production of milk by the farmer? In the midst of this crisis the Government of India wants to throw open the dairying sector to the EU under the EU-India Free Trade Agreement. In one sweeping action this will destroy livelihoods and lives in rural India.

I think we should just close down all Government Departments / Ministries that ostensibly speak about rural development. This way at least people are not living with the illusion that we as a Nation are committed to “inclusive growth.”