BDEP blog part four: Smallholder Dairy Development in Bangladesh: Dairy Company Partnerships Come to

Originally published on March 28, 2017.

In Part One we introduced some of the philosophies used by the BDEP team to guide their project, while in Part Two we mentioned how two of these philosophies drive the activities undertaken by BDEP. Part Three explored some of the most important topics which farmers are seeing demonstrated on a daily basis, on their farm or on their neighbor’s farm. This Part Four concludes the series with a description of what farmers can do with their milk, owing to significant private sector investment for sustainability.

By Geoff Walker

Plenty of evidence supports philosophy 7, “farmers need the consistency of the formal market if they are to invest to grow”. Perhaps the most famous example is with Operation Flood, which among other important features linked smallholder dairy farmers to the large market of Mumbai. Attempting to enhance the productivity of dairy farmers will prove ineffective unless there is strong formal market linkage; if this does not exist, higher productivity will almost certainly result in local oversupply and lower prices for the farmers we are trying to assist. In a country such as Bangladesh, as philosophy 2 states, the smallholder cannot be taken to the formal market; rather the formal market needs to be brought to the smallholder.” Most smallholders cannot transport their milk further than a couple of kilometers. It is impossible for smallholders to transport milk to some far away processing or chilling center. Rather, the formal market needs to come to the smallholder, and that must be in the form of village level milk chilling centers (MCCs).

I believe that in dairy sectors dominated by smallholders with weak productivity, the greatest gains can be made by addressing the real reasons for that weak productivity. In my experience, this almost always relates to basic farm management practices, especially the supply of water and nutrition.

For example, take Josna Begum, a farmer of Ultadab village, Rajshahi Division, who milks three cows, one of the smallest farming operations we work with. By the time she buys inferior concentrate and poor but expensive fodder such as rice straw, then has to treat her cows regularly as poor nutrition causes them to fall ill too often, she doesn’t earn much of a profit. It wouldn’t make sense to give her funding to open a dairy processing plant to improve her milk prices, with only 20 or so liters of production, even if she were associated with other farmers in a group processing facility. What does make sense, however, is to help her focus and improve on-farm practices to increase her productivity.

In the case of Mrs. Begum, with strong support through the BDEP approach to training and the arrival of a new milk collection center established by a partner dairy company, her milk production has gone up by 6 liters per day, she is getting a 25% higher milk price caused by the new MCC and higher fat content of her milk, while feed costs are down and health treatment costs have declined to virtually zero. All in all, Mrs. Begum is better off by around BDT 580 per day (say $7.50 per day, a 90% boost to her income). As noted, solutions to low farmer income are sometimes sought by improving the price at which that milk can be sold, an off-farm solution to what are very much on-farm problems.

For example, a farmer may receive funding assistance to establish a manufacturing facility. While this may increase the value of her milk, it requires her to reduce her focus on farm management issues which have the potential to increase productivity by 500%, much more valuable than a price increase. Modern economies, and close to 100 percent of developed dairy sectors feature specialization – farmers should farm; processors should process.

These philosophies, and the desire to achieve meaningful and sustainable change in the dairy sector of Bangladesh, have led BDEP to enter into sub-awards with three significant dairy companies: Akij Food & Beverage Ltd, BRAC Dairy & Food Ltd, and PRAN Dairy Ltd. These partnerships are now showing tangible results in the form of village level MCCs, with supporting logistical chains in the form of milk collection hubs and road tankers.

The partner dairy companies of BDEP have now established more than 72 MCCs. As linkages with farmers grow, these MCCs will provide formal, consistent market access for more than 6,000 farmers. In a couple of locations, the concerned dairy company has already invested in additional capacity to cater for the volume of milk being brought to their local center by nearby farmers.

At these centers, farmers are receiving higher prices for their milk compared to the previous alternative, typically a middleman. In addition, fat content is being recorded accurately and payment adjusted accordingly. When combined with farmer training in whole farm management, as introduced by BDEP, and enhanced nutrition available from BDEP trained and supported specialized mini-agribusinesses, farmers are producing more milk with higher fat content as well as receiving a better price.  Dairy companies, meanwhile, report they are able to procure the best quality milk directly from the BDEP trained farmers, and the higher fat content improves their profitability. Success all round!

But 72 MCCs is not the final goal of the plans of BDEP partners: by the end of the project the number of new chilling centers supported by BDEP will reach close to 80, a significant boost to the dairy sector of Bangladesh and local dairy farmers.

Concluding this blog series
BDEP is helping Bangladeshi dairy companies to do what they need to do, but in return, partner dairy companies are making significant investment in infrastructure and staff. To date, the contribution reported by dairy company partners is in excess of $2.6 million; plans from now to the end of the BDEP project will see at least a further $2.1 million in private sector investment, and the BDEP team is hoping for total contribution to reach $5 million by mid-2017. The 80 MCCs to be established by partner dairy companies with the support of BDEP will form a permanent part of the infrastructure of the Bangladesh dairy sector. Obviously, our partner dairy companies are active in and focused on dairy; these companies have strong and natural interest in procuring more milk and better quality milk, in order to grow their businesses. Dairy is not a part-time activity from which they will withdraw at the end of BDEP. The knowledge BDEP has imparted to both Advisory Service staff and farmers is there for continued use and development. Our MABs are profitable, to the extent that many are finding they can sell their fodder crops in advance, such is the demand being created by the genuine farmer training provided by BDEP. All these factors are the very definition of sustainability in the dairy sector. BDEP and USDA have built the foundations for a more modern and productive dairy sector.

The integrated BDEP approach may be summarized as follows:
  • MCCs being operated on a commercial basis by dairy companies
  • These same dairy companies operating Advisory Services which provide genuine support to farmers through Advisory Services, which among other impacts creates demand for better animal nutrition
  • The profitable operations of the new mini-agribusinesses supplying the best quality nutrition in Bangladesh.

I believe that the implementation of BDEP through these three high-level components, guided by my dairy development philosophies, has proven extremely effective. Recent engagement with institutions providing tertiary education to the dairy sector of Bangladesh augurs well for BDEP to continue to be a catalyst for development of the Bangladesh dairy sector long after the project itself ends. The same could be said about the intent of an additional dairy company outside our project area committing to follow the BDEP approach as it expands its milk procurement chain. BDEP has built human capacity to an extent not previously seen in Bangladesh, and my vision is that the industry will continue to drive meaningful change, with more public and private sector funding. And, perhaps, with some local adjustments, these eight BDEP philosophies could be used in a wider geographic setting than just Bangladesh.


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