Dairy farms seen growing bigger: Rabobank

Source : thehindubusinessline

Rabobank expects sourcing of milk from dairy farmers is going to be the key challenge for processors in the coming days. Milk processors are strengthening their ties with farmers and encouraging them to grow their farm size to 50-300 cattle from the current level of 30-50 cattle.

With the strong growth in branded milk and dairy products, direct milk sourcing will gradually replace the agent-based sourcing and this will help them secure consistent supply of superior quality raw milk, said Rabobank’s recent report on Emerging Dairy Farm Trends in India.

Though share of milk procured from small and marginal farmers will decline, this segment will still stay relevant as currently 75-80 per cent of milk is procured from these farmers.

Large-scale-dairy farming with over 1,000 cattle has proved difficult to establish due to factors such as land availability, paucity of professional labor, fodder availability, ban on import of cattle, it said. Shiva Mudgil, Senior Dairy Analyst, Rabobank’s Food and Agribusiness Research, said procurement from small and marginal dairy farmers would increasingly become a challenge for milk processors and the industry will see the emergence of farmer owned dairy farms with herd sizes ranging from 50-300 cattle.

Rabobank believes that this farming trend will be driven by existing farmers upgrading to medium scale and fresh investment from private equity investors who will help the farmers in getting modern services and technologies to manage dairy farms efficiently.

‘India heading towards medium-scale dairy farms’

India’s dairy farming sector is headed for significant change, according to Rabobank, a major financer of agri and dairy-related businesses. This will be, the bank said, due to the increasing demand for high-quality milk from the consumer side, and procurers as well as processors emphasizing cost competitiveness from the manufacturing end.

A sector report published by Rabobank said: “Strong growth in India’s organised dairy industry, due to formalisation of perishable milk products and the growth of value-added dairy products, has placed the focus on raw milk sourcing. In the coming years, milk procurement will become the single most critical link in the dairy supply chain.” The report, ‘Emerging Dairy Farm Trends in India’, pointed out that “Medium-scale dairy farms with 50 to 300 cattle will be the one of the key growth drivers in Indian dairy.”

The report estimates that to keep pace with the strong growth in branded milk and dairy products, direct milk sourcing will gradually replace agent-based sourcing as a dominant model. This will help them secure consistent supply of superior quality raw milk.

“The share of milk procured from small and marginal farmers will decline. However, this segment will still stay relevant,” Rabobank said. At present, 75-80 per cent of milk is procured from these farmers. Large dairy farms with cattle herd of over 1,000 have faced issues such as the availability of land and fodder, a paucity of professional workers, and a ban on import of cattle. Rabobank expects this segment to remain with a select few. Therefore, for new dairy entrepreneurs, medium-scale farms are the emerging trend.

“As procurement from small and marginal dairy farmers will increasingly become a challenge for milk processors, the industry will see the emergence of farmer-owned dairy farms, with herd sizes ranging from 50 to 300 cattle,” Shiva Mudgil, senior dairy analyst at Rabobank’s Food and Agribusiness Research and Advisory told The Hindu . “Industry players, including milk processors, along with nutrition, genetics and equipment service providers will start to realise this emerging trend.”

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