Dairy industry in Bangladesh: Prospects and roadblocks

It may appear alien to many that traditional milk collectors and sellers, known as Goalas, used to visit households with their milk containers every morning to sell fresh milk. And households used to buy from them.

Over the last two to three decades, things have changed a lot. Several industrial processors have emerged—collecting, processing and selling milk and milk products in packaged form with the promise of hygiene and quality. And Goalas have started losing their prominence.

Today, an increasing number of people are shifting to packaged or powdered milk in their quest for safe food. At the same time, processors have increased processing and expanded their footprints in the urban landscape.

Now, more than half a dozen milk processors are processing 10 lakh litres of fresh milk daily, which is more than double the amount they could process a decade ago. And organised milk processors, gradually encouraged by business prospects arising out of increasing demand for milk and milk products, are increasing the volume of processing.

“With a change in food habits, we find that there is growth of milk consumption every year,” said Md Muniruzzaman, executive director of PRAN Dairy Ltd, a concern of the country's biggest agro-processor Pran.

Pran, now the market leader in UHT (Ultra Heat Treatment) and pasteurised milk category, entered the sector in 2003 sensing immense potential in the dairy sector because of a deficit in domestic milk production against demand. As a result, the country has to import more than 100,000 tonnes of powdered milk and dairy products by spending Tk 2,000 crore a year, according to data by Bangladesh Bureau of Statistics and Bangladesh Bank.

Industry insiders have said that this huge supply-demand gap offers business prospects as there is scope to increase milk yield per cow in the country as there is a high density of cattle population.

The World Bank, recently in a document, said growing demands for animal source food, a high density of cattle population, very high potential for productivity improvement, agro-ecological conditions favourable to feed production, availability of crop residues, and a culture of mixed crop-livestock farming represent assets the sector can build on.

Muniruzzman said Bangladeshi cows are low in yield providing 2-5 litres of milk per day. “If new breeds of cows are developed, they can provide even 14-15 litres of milk per day. This is not an overnight process but a gradual one that will develop generation by generation. Within 10-20 years, this can be done,” he said adding that Pran works with 12,000 farmers in five dairy hubs in four districts—Rangpur, Natore, Pabna and Sirajganj—to improve productivity.

He said because of a deficit in domestic production, Bangladesh still has to import a huge amount of powdered milk every year to meet the demand of households and sweets industry, as well as for making value-added products like cheese, butter and yogurt.

“This is because farmers did not even consider dairy as their profession like they do farming. Even today in the villages, farmers consider the cows to be the responsibility of their wives while they concentrate on the bulls, which they can use for ploughing land,” he said.

Dairy farming expanding 

However, things are changing.

New faces are entering the dairy farming sector and many existing farmers are focusing on improving productivity of their cows through artificial insemination, providing better care and proper feeding.

In addition, milk processors such as Milk Vita, Pran and Aarong are supporting farmers.

“Many educated youths have started cattle farming for milk and meat production in the last five years. As a result, supply of milk is now double the amount produced five years back,” said Mohammad Shah Emran, general secretary of Bangladesh Dairy Farmers' Association (BDFA).

Emran started his farm, Shopno Dairy and Fisheries, at Trishal in Mymensingh, with only two milking cows and three heifers, in early 2015. Today, it has 22 cows, including 12 milking cows.

The Department of Livestock Services (DLS) also registers increasing farming activities. Some 58,590 farms, each with 10 or more cows, have registered with DLS for dairy purposes till now. Of those, 155 farms signed up since July this fiscal year, according to DLS. 

New dairy zones have emerged in Gazipur, Savar, Rangpur and great Jessore in the last several decades apart from the traditional milk production Pabna-Sirajganj area, according to two officials of DLS.

“Overall farming is rising as demand for milk and milk-based products is growing in urban and semi-urban areas,” said DLS Assistant Director (Farm), ABM Khaleduzzaman.

“Previously, cattle farming had been limited to smallholders in rural areas. This has changed in recent years. Dairy farms have been established in urban and suburban areas,” he said, adding that more than 1,000 cattle farms have been established in areas surrounding Dhaka city, particularly in Dhaka's outskirt Keraniganj.

National average milk yield has also increased from 1.5 litres in the 90s, he added.

Md Hossain Shah Newaz, assistant general manager, marketing of BRAC Dairy, said 90.9 lakh tonnes of milk production would be required in the year 2025 in Bangladesh with a modest population growth rate and per capita milk consumption of 120 ml. Total yearly requirement will be 1.90 lakh tonnes if per capita daily milk consumption rises to 250 ml as suggested by the World Health Organization.

“Now we are highly dependent on imported powdered milk. Therefore, local dairy industry has immense opportunities to grow,” he said.

Problems lying ahead

However, there are various issues hindering faster growth of dairy farming.

Apart from shortage of high yielding cows, scarcity of land for dairy farms, shortage of high yielding and quality semen for AI, lack of technical knowhow for farming, high cost of labour and feed, inadequate treatment facility for cattle and lack of knowledge of handling milk are the major hindrances for faster development of the sector, said farmers and industry stakeholders.

Above all, low tariff on powdered milk import affects farmers in getting fair prices for milk.

“Dairy is an emerging sector. It cannot grow unless higher tariff is imposed to discourage import of powdered milk,” said BDFA General Secretary Emran adding that import prices of milk remain low because of subsidy given to farmers and to the industry by countries in the West.

BRAC's Newaz said locally produced milk becomes less competitive than imported milk owing to low import duty.

 As we consider powdered milk as baby food and impose less tax on its import, local milk becomes less competitive in the market. But the reality is that only 10 percent of the imported powdered milk is being used as baby food and the rest 90 percent is being used for other forms of consumption, he said.

Emran said improved semen is necessary to increase milk yields. “Semen import and marketing should be opened up to the private sector. Let there be competition,” he said demanding authorities make rules to provide information of genomic and progeny tests available to farmers.

What to do next

Emran said farms are slapped with electricity bills at commercial rates although dairy belongs to the agro-based sector. “This increases cost of our operation. We demand waiver from electricity bills at commercial rates as dairy belongs to the agro-based sector,” he said.

“We also need support to import modern equipment for dairy farming.”

Both Muniruzzaman and Newaz recommended establishing a Dairy Development Board soon to promote the sector.

“Formulate and implement a national dairy policy and National Dairy Development Board to create a platform for dairy development in the country,” said Newaz of BRAC Dairy.

Muniruzzaman suggested providing easy and low-cost credit facility for the farmers and subsidy in feed and medicine, increasing facilities for animal husbandry and treatment, and taking steps to improve breed of high yielding cows.

“Allow good entrepreneurs to import semen for breed development,” he said, also recommending duty restructuring to import machineries, chemicals and packaging materials for the dairy sector.

Sohel Parvez is a Senior Reporter, Star Business, The Daily Star.