Analysis Of Dairy Industry In Bangladesh
To many it would sound funny now if someone told them that milk was something that was delivered dairy to people’s doorsteps by “Goalas”, today the entire market is dominated by processed milk plants and powdered or condensed milk. With big market players such as Aarong, Milk Vita, Pran dominating the market but they too have recognized certain challenges or drawbacks of this market but are also aware of the growth prospects of this industry in the future.
Key risks and challenges
Increased competition from imported powdered milk
There is very low tariff on powder milk imported from abroad with the reason being powdered milk is used as baby food when in reality only 10% is used for baby food, the remaining 90% is used for all other purposes. With lack of proper tariff on the imported milk it has become very difficult for the local firms to compete. Low tariff on powdered milk import affects farmers in getting fair prices for milk.
Restriction on private firm to import and market bull semen required for dairy production
Increased competition in this sector would make local producers more price competitive and it also increase production as current Bangladesh has a shortage of high yielding cows. With this permission there can be an increase in production and can also bridge the gap of demand and supply and stop import of over 100,00 tons of powdered milk.
Commercial electricity rates charged to small dairy producers
Small dairy producers are charged with the commercial electricity rates which increase their costs and hence, they are unable to make enough profits to invest further in the business. Even though the dairy sector falls under agro-sector they do not enjoy subsidized rates. Support is minimal to dairy producers and so growth is slow.
Other than these scarcity of land for dairy farms, lack of technical knowhow for farming, high cost of labor 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 add to the challenges.
Key success factors
Increased consumption trends globally
Consumption of milk and dairy products has been expanding dramatically with income growth, population growth, urbanization and dietary changes. Three-fold increase in meat, milk and dairy product consumption is expected in South Asia. Taking the modest population growth rate of 1.6% and per capita milk consumption of 120 ml, some 9.09 million tons of milk production will be required in the year 2025 in Bangladesh. Therefore, the dairy industry will have to be the potential to grow much faster than the present growth rate. The most important and prerequisites for sustainable growth of this sector is the security of the feeds and nutrition of the dairy animals, particularly the availability of good quality forages. The daily feeding of green forage is probably the first one among many secrets of success in a dairy farm. Good quality forage contains most of the nutrients essential for maximum production of dairy animals. Where land and forage are available, milk production as a part of integrated crop-livestock activities may be more economically efficient and less risky than monoculture grain cropping.
Supply versus demand driven growth
Like elsewhere in the world, the dairy industry of Bangladesh is mostly demand driven. The elasticity to demand depends on population growth, income growth and urbanization. The steady population, urbanization and income growth reveal that there is an increasing demand of animal origin food like milk and meat. The deficit percentage clearly indicates the potential dairy industry in Bangladesh. Almost 100,00 tonnes or TK2000 crore (BBS) worth of powdered milk is being imported to meet demands which the local firms can capitalize on.
Supportive government policy
Government has also liberalized its policies to encourage the growth of dairy sector in Bangladesh by introducing tax holiday, subsidy in electricity and also incentives for export.
