Analysis Of Milk Marketing Channels In The Punjab Province Of Pakistan

Livestock farming is an important segment of agricultural economy which helps to satisfy the nutritional and livelihood needs.Milk production is a vital activity of livestock farming that can be used to develop a healthy society and employment generation in rural areas.Nearly one-third of world's intake protein is provided by milk and milk products.Sale of surplus milk through marketing channels generates income for milk producers.In Pakistan,about 8 million rural families are engaged in dairy farming.Livestock sector is contributing 58.6 percent in Pakistan's overall agricultural value addition.Approximately 54,328 thousand tons milk was produced during the year 2015-16.There exist two types of milk marketing system i.e.traditional/informal and the modern/formal milk marketing channels in Pakistan.Traditional milk marketing channel is a dominating system that holds approximately 94%share in total volume of milk marketing while modern milk system is lagging behind having only 6%market share.This research study has attempted to analyze the prevailing milk marketing channels in Pakistan with specific objectives to identify major factors for the dominance of traditional milk marketing channels among milk producers and consumers as well.Factors influencing the selection of milk marketing channels among milk producers and consumers have also been estimated.The study has also focused to compare the marketing and profit efficiencies of two marketing systems by estimating their marketing margin,costs and profit shares.The study area regarding this research was comprised of four districts,geographically located in the south region of Punjab province of Pakistan.Both primary and secondary data sources were used for this research.Multistage random sampling techniques were used to select 536 respondents that included milk producers,milk collectors,milk collection centers,milk processors,distributors,milk retailer,and milk consumers.Secondary data was gathered from different institutions e.g.Agriculture and livestock department,NGOs,Universities,research departments and dairy processors marketing departments.For descriptive analysis and to discuss the socioeconomic characteristics of milk producers and other respondents,simple calculations of frequency distribution,cross-tabulation,means,and percentages were estimated.Multinomial logit model was applied to explore the causes for the dominance of traditional milk marketing system.Regression models were also applied to evaluate the impacts of major factors influencing the choice of milk producers and consumers for the selection of milk marketing channels.To make an economic comparison between traditional and modern channels of milk marketing,the marketing efficiencies were measured through gross profit margin(GPM)analysis while for estimating the profit efficiency of marketing channels the Data Envelopment Analysis(DEA)was used from farm-to-retail milk prices.Analysis of price movements or price spread within markets and over different marketing agents was carried out through Vector Error Correction(VECM)model.Analysis of descriptive statistics related to milk producers showed that 71.8%were male,illiterate were 26.5%while primary education was acquired by 36.25%t milk producers;whereas the averages age was 46.5 years,family size was 6 individuals,88.75%were married and almost 100%were engaged with the occupation of dairy farming.Distribution of milk producers by the type of milk marketing channels indicated that about 88%were selling their milk produce through traditional channels while 9%were selling through modern channel and the remaining 3%were selling to the village neighbors directly.Results of multinomial logit model showed that eight factors like gender,old aged farmers,long distance between dairy farm and urban market,easy milk selling at door step,advance cash payment,lack of quality inspection,strong social relationship with collectors,and better milk price were important predictors influencing milk producers to choose traditional channels for the sale of their milk produce.Impacts of these variables were significant at 5%of significance level except long distance which was significant at 1%.Conversely to this,high education level of dairy farmers,large herd size,provision of extension services,and purchase of evening milk were major factors which motivated the farmers to select modern channels for selling their milk produce.Traditional milk channels were preferred by majority of the milk producers but these channels were lacking in delivering the quality milk to consumers.Milk consumer behavior regarding their preferential choice for the selection of traditional or modern channels was analyzed by categorizing the determinants into six major factors i.e.consumers' personal factors,social factors,economic factors,awareness factors,milk channel intrinsic and extrinsic factors.Results of multinomial logit model showed that old aged consumers,large family size,low milk prices,milk taste and supply of milk at door-step were the factors which positively and significantly influenced the consumers to choose tradition channels of milk marketing.Factors such as young aged consumers,families having children under aged six years,households with better education and higher income,more awareness for milk quality standards,advertisement and good packaging were the major determinants that positively influenced the choice of modern milk marketing channels.Study findings proved that nearly 78%of milk consumers consumed fluid milk in raw form without any quality inspection.Majority of the consumers liked to buy cheap milk which had high fat contents.To improve the marketing share of processed milk,dairy industry should target educated and high income consumers through advertising and promotional campaigns.Certain other reasons like substantial price difference between loose milk and packed milk,option to purchase of loose milk in desired volume and its ability to use in multiple patterns also positively affected the choice of traditional channels.Results of Vector Error Correction model showed that market integration system for milk marketing channels was imperfect in nature.The market power was towards the demand side and asymmetric price transmission existed in milk supply.Seasonal fluctuations affected milk production during summer and winter which influenced the milk demand and supply patterns and caused variations in milk prices.Model results showed that consumer level price changes were transmitted from consumers to milk producers in an asymmetric mode and middlemen abuse their market power to absorb positive price shocks.The outcomes of Granger Causality test proved that the direction of causality was from milk consumers to milk producer because retail pices did not absorb any negative change in prices.This situation dragged the dairy farmers in a vulnerable position and deprived them from getting fair prices of their milk production.The coefficients of model showed that when milk producers' price increases(at the time of milk shortage in acute seasons of summer and winter)by one unit,milk middlemen/or retailers contemptuously shift this one unit increase to consumer price in order to retain their profit at fixed level(deviation equal to zero).Outcomes of different performance parameters(i.e.marketing margins,marketing costs,average price spread etc.)for traditional milk marketing channels demonstrated that the major marketing cost for moving the milk from milk producers to consumers was the labor cost(37.96%),followed by transportation cost(22.87%)and the storage cost(21.48%)at milk collector and retailer levels.Total price spread was highest for local milk collectors/Dodhi(average Rs.9.25 per liter),followed by retailer(average Rs.5.37 per liter).Mean value of milk producer's share in consumer price was approximately 63%while it varied between 64%,65%,57%and 66%among four districts respectively.Percentage of profit margin for milk collectors and milk retailers' was 36.38%and 21.12%respectively.Overall mean value for the measure of marketing efficiency(MME)was 1.8 for traditional milk marketing channel.Outcomes of these parameters for modern milk marketing channels showed that,the variable costs and fixed costs at milk processing level were occupying the share of 56.37%and 43.63%respectively.Fixed costs in terms of establishing milk processing plants,were major costs that largely increased the price of processed milk.The results of profit efficiency showed that traditional channels(between 0.69 and 0.73)were performing well in lieu of financial returns to milk marketing agents as compare to the modern channels(between 0.29 and 0.40).Low efficiency of modern milk marketing channels were justified due to higher fixed(machinery costs + permanent labor)and variable costs(packaging material of UHT milk).Finally,this study proposed certain suggestions to bring improvements at each node of milk marketing chain.Milk producers should focus on value addition and acquire certain capacity building trainings.Milk collectors/Dodhi should make arrangements for cold supply in moving milk from producers to consumers.In order to reduce the price of processed milk,milk processors should utilize local manufactured packaging material.An appropriate advertisement for general public awareness about packed milk should be undertaken.Retailers and milk shops should focus on preserving milk quality and shelf life for longer time in refrigerated environment.The government has a major role to concentrate on research and development(R&D)to improve genetic potential of cattle breed,develop farm to market infrastructure and make available financial services to the dairy farms.The application of these integrated efforts can be very helpful to realize the availability of sustainable supply of quality milk to diary sector that will significantly contribute towards the economic development of study area in Punjab province of Pakistan.