THE SMALL-SCALE DAIRY VALUE CHAIN ANALYSIS: CHALLENGES AND OPPORTUNITIES FOR DAIRY DEVELOPMENT IN MYMENSINGH DISTRICT OF BANGLADESH

This study examined the prevailing dairy value chain based on primary data collected from 70 small-scale milk producers of Mymensingh district of Bangladesh. The total cost and net return per month per cow were Tk. 4024.30 and Tk. 3165.70, respectively. The net value additions of Tk. 2091.42, Tk. 495.00, Tk. 655.00, Tk. 503.25, Tk. 309.70 were estimated for milk producers, collectors, Faria, Bepari and retailers respectively. Different actors spent highest marketing cost ranged from Tk.49 to Tk.80 for transportation compared to other marketing functions. Actors mostly dependent on the on-going market prices for setting price of milk in the value chain. A value chain map was developed showing the relationships and linkages among value chain actors of small-scale dairy. The study identified some critical factors for successful dairy marketing. The factors were understanding consumer behaviour, technology and transportation, improved business relationships, reduced transaction costs, and improved information flow, and organized market structure. Milk producer’s share in consumers’ price was highest for channelI followed by channelV. Expensive, inadequate, low quality feed, lack of grazing land, green grass, inadequate capital, knowledge about cost of production, weak extension services, high fees and unavailability of veterinary doctors, were some of the major problems of milk producers. Supply of adequate feed at subsidized price, ensuring easy access to institutional credit at a lower interest rate, adequate medicine and veterinary services, allocation of khas land for producing fodder/grass, were suggested to solve the problems.


INTRODUCTION
In all developed countries, dairy sector is receiving special attention from the government. It is because the milk and dairy products help building up vitally strong nations by developing brain and bone of its people. Dairy enterprise is considered as Treasure for the economy of Bangladesh, particularly for rural areas (Kabir and Talukder, 1999). In Bangladesh, the contribution of livestock sector to agriculture share of Gross Domestic Product was 13% during 2014-15. Besides, according to FAO (2011), the per capita average yearly milk consumption in Bangladesh is only 13 kg and it is the lowest in South Asia because of higher cost of production and lower yield compared to any other south Asian countries. FAO statistics further reveals that the per capita daily calorie intake through milk in Bangladesh is only 24 Kcal, while in Sri Lanka it is 57, in Nepal it is 82, 104 in India, and 265 in Pakistan (FAO, 2011).
Rearing dairy cow is one of the most important investments a farmer can make to improve their socio-economic condition because of the valuable nutritional milk produced and diversify farming activities. It is estimated that more than 750 million people are engaged in milk production worldwide. The production of one million liters of milk per year on smallholder dairy farms creates approximately 200 on-farm jobs (ILRI, 2010). In Bangladesh, the annual national production of milk is 5.23 million tons and the annual demand is 17 million tons, out of which 97% is produced in rural areas. The quantity of national milk production can only meet about 30% of the actual demand for milk of the population (DLS, 2014).
Dairying is a biological system that converts large quantity of feeds and roughage into milk. It is more efficient and intensive system in terms of nutrient and protein production for human consumption from a given quantity of resources than beef or sheep farming (Michael, 1991). A farmer having not more than 10 cows will be fallen under small-scale category (DLS, 2014). However, small-scale dairying is very important for income generating activity to the poorer section of this country and reduction of the poverty. Traditionally, little attention has been paid to the value chains by which agricultural products reach final consumers and to the intrinsic potential of such chains to generate value added and employment opportunities (UNIDO, 2009).A value chain is a high-level model used to describe the process by which businesses receive raw materials, add value to the raw materials through various processes to create a finished product, and then sell the end product to customers (Porter and Michael, 1985). The livestock value chain can be defined as the full range of activities required to bring product (e.g. live animals, meat, milk, eggs, leather, fiber, manure) to final consumers passing through different phases of production, processing and delivery. Value chain analysis is essential to an understanding of markets, their relationships, the participation of different actors, and the critical constraints. The development of the dairy sector in the country is hindered by a number of technical, institutional and socioeconomic constraints. Development of small scale dairy sector through the assessment of dairy market is necessary to create employment opportunity for the people in rural areas.
Modalities of such impact have been described in a good number of literatures. An attempt has been made in this section to review the previous studies related to the present study. Kabir and Talukder (1999) examined the financial performance of small scale dairy farms participating in the government subsidy programme. Significant increase in production and consumption of milk as well as in labor employment was observed. Shamsuddoha (2000) carried out a study on problems and prospects of dairy industry in Bangladesh. He described the main problems concerning feeding, management, diseases and marketing for which dairy development is unsatisfactory. O'Lakes (2010) carried out a study on dairy value chains, end markets and food security for Ethiopia. A majority of the dairy households in Ethiopia directly consume most of their animals' milk production (85%) and the informal market channel handles 90% of milk and milk products. Achchuthan and Kajananthan (2012) conducted a study on the value chain analysis in dairy sector in Kilinochchi District, Sri Lanka. Weindmailer (2003) investigated the milk value chain: concept, possibilities of optimization and areas of conflict. The importance of supply chain for the milk value chain and its effect on consumer response are discussed. Mandal (2006) carried out a study on supply chain analysis of wholesale milk market in selected areas of Dhaka district. The study also revealed that the value addition of sweet meat shop owners were higher than that of other intermediaries. Seifu and Doluschitz (2014) conducted a study to characterize the dairy value chain and to identify challenges and opportunities for development of the dairy industry in Dire Dawa, Eastern Ethiopia.
More study was conducted on the value chain of commercial dairy farmers and other agricultural products. There was no study on value chain of small scale dairy farmers living in rural areas that provides lion's share of milk to the consumers in the country. The milk yield, reproductive performance of cows, the transformation, marketing and final sale of the dairy products to consumers does not reach their full potential because of various challenges associated with each value chain actors that need to be identified. Therefore, the present study was aimed identify the key actors, map the value chain and emerging challenges in dairy production.

MATERIALS AND METHODS
The study was conducted in at three Upazilas namely Gafargaon, Bhaluka and Trishal under Mymensingh district where different market actors were available. A total of 30 milk producers and 40 traders were selected as sample. Among the traders, milk collector, Faria, Bepari and retailer were 10 individually in number. Market actors were interviewed using structured interview schedule for collection of data and information through face-to-face interview method.

Analytical Techniques
Descriptive statistics were used to analyse key actors with functions and the value chain map of small scale dairy farmer.

Measurement of value addition
To achieve the third objective of the study, the following equation was used to assess the profitability of milk producers and value addition by traders. Retailer's share in consumer's price =(Total market margin of retailers/Consumer's purchasing price)*100

Measurement of milk marketing efficiency
There are several types of measures that have some values and limitations in measuring marketing efficiency, but no single one can tell the whole story. However, the following formula was used to measure the milk marketing efficiency (Acharya and Agarwal, 2004) of a particular marketing chain. The higher value of marketing efficiency denotes higher level of efficiency and vice versa.
Marketing efficiency (ME) = Where, FP = Net price received by producer (Tk/ton) MC= Total marketing cost incurred by intermediaries (Tk/ton) MM = Total net marketing margin received by intermediaries (Tk/ton)

SWOT Analysis
ASWOT analysis was done in this study which identified the internal and external factors that are favorable and unfavorable to small-scale dairy sector. A SWOT analysis is usually in the form of a 2x2 matrix or a grid with four sections. The top two sections list the strengths and weaknesses and the lower two sections list the opportunities and threats.

Marketing Functions of Small Scale Dairy Value Chain Actors
Buying and selling Small scale dairy farmers sold 60% of their milk to collector and Faria and the remaining 40% sold to the consumers directly. About 30% of milk was sold to the Bepari by collectors and 70% to Faria. Faria sold 75% of milk to Bepari, 18% to consumer and 7% to retailer. Bepari sold 27% of milk to the local retailers at Upazila level and rest to the district level buyers. Finally, retailer sold their milk to the ultimate consumers (Field survey, 2017).

Pricing practices, market information and financing
Most of the farmers (80%) and collectors (60%) practiced on-going market price; Faria (70%) and retailer (60%) followed open bargaining and Bepari (80%) practiced prefixed prices for selling milk to different market actors (Table 1). Farmers (80%), collectors (70%), Faria (80%), Bepari (75%) and retailer (90%) got most of their market information from milk market and the rest was from other traders. The main financial source for farmers (70%), collectors (85%), Faria (75%), Bepari (40%) and retailers (70%) was own fund to run dairy business. They also borrowed little amount of money from bank, NGO, friends and relatives. Different mode of transportation like van, rickshaw, bus, bicycle, pickup, and train was used to transfer milk to market actors. Farmer did not use train, collector did not use van and rickshaw, and Faria did not use rickshaw. Bepari only use pickup and train. Consumers directly buy milk from producers, Faria or retailers (Table 1).  Packaging Polythene or plastic bottle was used for packaging by farmer and retailer, large metal drums were used by Bepari for milk transportation. They used banana leaf to reduce perishability of milk.

Dairy Value Chain Governance
In the study area, most farmers feed low quality feed to cows and try to earn more profit by mixing water with milk. The marketing of milk was conducted following traditional rules and regulations.

Mapping of Small-scale Dairy Value Chain and Critical Success Factors of Value Chain
Mapping value chain of small scale diary Value chain of dairy started from dairy producer then collector, Faria, Bepari and finally retailer who added value to the marketing channel of milk. Small scale producer utilized milk by home consumption and selling. When milk is transferred to wholesalers (Collector, Faria, Bepari), they either sell it to retailers or traditional processors (who make sweet and curd) or to distant larger wholesale market (Mymensingh, Dhaka, and Gazipur) for urban consumers. In figure 5.1, the distribution channel, actors involved in milk business and their percentage of net value addition was shown.

The Critical Success Factors of Dairy Value Chain
Henry Ford reported that "coming together is a beginning. Keeping together is progress. Working together is success" (Brainy Quote, 2005). The key success factors are discussed below:

Understanding Consumer Behavior Properly
The actors fail to anticipate the market demand for milk due to less education and less awareness of changing consumer behaviour.

Technology and Transportation
The major technological constraint was the absent of processing plant. About 50% of the farmers and 75% of the traders opined that the transportation system of milk marketing was good.

Improved Business Relationships
Gooch observed that respect, not trust, is one of the fundamental pillars upon which many successful agro-food value chains are founded. According to the survey, 30% of the respondent actors complained adopting unethical activities like mixing water and powder milk with liquid milk that hampers the dairy business of others.  Hobbs (1996) categorized transaction costs into three types. These are information costs, negotiation costs, and monitoring costs. In small-scale dairy value chain while prices are often the main focus of commodity there was no attempt to reduce the transaction costs.

Improved Information Flow
About 30% of the dairy actors opined that they didn't have enough access to accurate, timely and relevant information which increases transaction costs and results in inappropriate resource allocation.

Organized Market Structure
Small-scale dairy market is not well organized due to no fixed chain and price fluctuation hampers efficiency of value chain stated by 20% actors.

Governance
The was no market monitoring authorities opined by 65% actors to control the price variation; maintain quality feed, and healthy handle of bulk milk.

Cost, Return and Value Addition Analysis
Production cost and return of dairy For calculating total production cost, both variable and fixed costs were taken into consideration. The components of variable cost were the feed cost (paddy straw, green grass, oil cake, molasses, bran and salt), labour cost, doctor cost, medicine cost, interest on operating capital and miscellaneous cost. Fixed cost items for milk production were land use cost, cowshed and maintenance cost. It is evident that total variable cost and fixed cost of milk production was Tk. 3715.02 and Tk. 309.28 per month per cow which was 92% and 8% of total cost. Among variable components, feed incurred the highest cost (79.13% of total cost) followed by interest on operating capital (5.53%) and labour. Net margin per quintal of milk was Tk. 2638.08 (Table  2).

Marketing Cost and Value Addition
Different items were associated with marketing cost of milk. The major marketing cost for milk producer was packing of milk with poly bag (48.40%). On the other hand, milk collector, Faria, and Bepari incurred the highest cost for transportation (47.62%, 55.17% and 50.40%) as a part of marketing cost. Milk retailer spent larger portion of total cost for paying rent. Among different marketing actors, the highest cost was incurred by milk producers (Tk. 155/100 litre) followed by Faria (Tk.145) and milk collector. Total value addition and net value addition were highest for milk producer (Tk. 2246.42 andTk. 2091.42 per 100 litre) compared to other marketing actors (Table 3).  Table 4 shows that milk producer's share in consumers' price was highest for channel-I and second highest for channel-V. Wholesaler's share in consumers' price was highest for channel-II, III, IV, and retailer's share in consumers' price was highest for channel-VI. On the other hand, channel was ranked on the basis of marketing efficiency; the first and last ranked channel was channel I and channels VI.

Challenges and Opportunities for Dairy Production and Marketing
The weaknesses and threats of the small-scale dairy sector were more or less to all the sample farmers under the present study. Strengths and opportunities of this sector were similar too to the compatibilities of the small-scale dairy sector of these areas (Table 5).

CONCLUSIONS
The significance of dairy value chain analysis at small-scale is high as dairy sector is the means of livelihood of a large number of small farmers and traders; and it provides lion's share of the protein to the population of Bangladesh. It is found that dairy farming is profitable at small scale. The net value addition is positive and high at each level and profitable for traders. Farmers contributed to the highest value addition and Faria was the second highest contributor for their different services among all the actors of the value chain. Farmers and collectors practiced mostly ongoing market price; Faria and retailer followed open bargaining and Bepari dependent on prefixed price for selling milk. Milk producer's share in consumers' price was highest in different channel. The highest share of marketing cost for milk producer was packing of milk which needs to be reduced for lowering cost of milk. Again, milk collector, Faria, and Bepari incurred the highest cost for transportation. There are both challenges and opportunities exist in the dairy sector.