Introduction:

Starting a new dairy business involves various aspects, including milk collection and pricing policies. Understanding the milk collection system and implementing effective pricing policies is crucial for the success and sustainability of your dairy venture. In this blog, we will provide you with an in-depth guide on milk collection systems and pricing policies, offering valuable insights for new dairy business owners.

1. Milk Collection System:

1.1 Understanding the Milkshed: A milkshed refers to the geographical area from which a dairy business receives its milk supply. It is essential to allocate specific milksheds to individual dairies to develop an organized milk collection system. Undertaking extensive surveys in the milkshed area helps identify potential collection points based on factors such as the number of animals, future milk availability, and competitors’ presence.

1.2 Route Planning: Efficient route planning plays a vital role in milk collection. Consider factors like milk availability and road access to collection points when planning the routes. Analyze the distance from collection points to the dairy plant to ensure timely and cost-effective transportation.

1.3 Types of Systems: In India, there are four popular milk procurement systems: Direct, Contractor, Agent, and Co-operative systems.

• Direct System: In this system, organized processors collect milk directly from the producers by establishing village procurement centers.
• Contractor System: Milk is purchased from contractors based on pre-determined terms such as quality, quantity, and price.
• Agent System: Processors appoint agents to procure milk in specific areas. The agents facilitate payment directly to the producers, earning a commission.
• Co-operative System: Farmers form a co-operative society at the village level, which establishes milk collection centers. The society collects milk, tests and weighs it, and pays the farmers based on fat content or fat + SNF content. The village society then supplies/sells milk to the district co-operative dairy plant.

1.4 Chilling Centers/Bulk Milk Cooling Centers: If the dairy plant is located far from the collection centers, the collected milk is brought to a centralized chilling center or bulk milk cooling unit. Here, milk is cooled and stored in insulated tanks. Chilled milk is then transported to the dairy plant using insulated road milk tankers. This transportation usually occurs once a day.

2. Efficiency of Systems:

Each milk collection system has its merits and demerits. Evaluating the efficiency of the system is crucial. Key indicators to analyze include:

• Regularity in milk collection
• Efficiency of milk collection during lean and flush months
• Quality of procured milk
• Cost of milk procurement

3. Problems of Milk Procurement:

Understanding the challenges associated with milk procurement is vital for efficient plant operations. Common challenges include:

• Perishable nature of milk and the need for proper cleaning and sanitation measures.
• Commitment to lift small surpluses of milk from numerous farmers.
• Wide fluctuations in milk output based on seasons.
• Procurement from co-operative society members and non-members, payment issues, and input sharing.
• Lack of infrastructure like cooling facilities, unreliable electricity supply, and non-availability of spare parts.
• Transportation delays due to poorly developed roads and transportation systems.
• High costs of chilling and transportation.
• Specific procurement challenges in hilly regions, drought-prone areas, tribal regions, and forests.
• Ensuring quality of raw milk and addressing issues related to chemical and microbiological hazards.
• Dealing with adulterants and additives in raw milk.

4. Pricing Policy for Raw Milk:

Developing a rational pricing policy for raw milk is crucial to ensure profitability and encourage milk production. Consider the following factors when formulating your pricing policy:

4.1 Seasonal Variation:

Account for seasonal variations in milk production, availability of feed, and other factors that affect milk quality and quantity. During peak seasons when milk production is high, the pricing policy should incentivize farmers to supply more milk. Conversely, during lean seasons, the pricing policy should ensure farmers receive fair compensation for their lower milk yield.

4.2 Quality Parameters: Establish clear quality parameters for milk, such as fat content, protein content, and somatic cell count (SCC). Milk quality directly impacts the market value and processing capabilities of the dairy plant. Implement a tiered pricing structure that rewards farmers for delivering milk that meets or exceeds quality standards. This encourages farmers to focus on improving the quality of their milk.

4.3 Cost of Production: Consider the cost of production for farmers when determining the milk prices. Factors such as animal nutrition, healthcare, labor, and overhead expenses should be taken into account. Setting a price that covers the cost of production and provides a reasonable margin ensures the sustainability of the dairy business and promotes long-term partnerships with farmers.

4.4 Market Demand: Keep an eye on market demand and adjust the pricing policy accordingly. Stay informed about market trends, consumer preferences, and competition. If there is high demand for certain milk products or value-added dairy items, consider offering incentives to farmers who can meet the specific requirements for those products. This helps align milk production with market demand and maximizes profitability.

4.5 Transparency and Communication: Maintain transparency in the pricing policy and communicate it clearly to the farmers. Ensure that the pricing methodology is easily understandable, and farmers are aware of the factors considered in determining milk prices. Regularly communicate any changes in the pricing policy and provide a platform for farmers to address their concerns or seek clarification.

5. Incentives and Support Programs:

To foster strong relationships with farmers and encourage their active participation, consider offering incentives and support programs. Some initiatives that can be implemented include:

5.1 Training and Education: Organize training programs and workshops for farmers to enhance their knowledge and skills in dairy farming practices. Topics can include animal nutrition, breeding techniques, disease management, and efficient milk production. Investing in farmers’ education improves the overall quality of milk supplied to the dairy plant.

5.2 Technological Support: Provide farmers with access to technological tools and resources that can assist them in milk production, record-keeping, and farm management. This can include mobile apps for milk collection data, artificial insemination services, and access to veterinary expertise. By leveraging technology, farmers can optimize their operations and increase productivity.

5.3 Financial Assistance: Explore options for providing financial assistance to farmers, such as low-interest loans or subsidies for purchasing high-quality animal feed, improving infrastructure, or investing in modern milking equipment. Financial support can alleviate some of the financial burdens farmers face and incentivize them to increase milk production.

5.4 Collaboration and Networking: Encourage collaboration among farmers by facilitating platforms for knowledge sharing and networking. This can be done through farmer cooperatives, where farmers can collectively negotiate better prices for inputs, share best practices, and support each other. Promoting a sense of community and cooperation strengthens the overall dairy ecosystem.

Conclusion:

Efficient milk collection systems and well-designed pricing policies are essential for the success of any new dairy business. By understanding the milk collection system, addressing challenges, and implementing a fair and transparent pricing policy, new dairy business owners can build strong relationships with farmers, ensure a consistent milk supply, and achieve long-term profitability. Remember, constant evaluation and adaptation are key to staying competitive in the dynamic dairy industry.