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Dairy industry: Mounting costs sour milk production

13 Feb 2022

  • Challenges in sourcing animal feed affect dairy industry
  • Small dairy farmers suffering due to economic crisis: AIDA
  • NCPDF claims industry has collapsed, blames Govt. for not fulfilling promises
  • Questions why Govt. offers relief to big businesses and not SMEs
  • A litre of milk should be sold at Rs. 130: Navaratne
  • Price controls on milk not needed: State Minister
By Skandha Gunasekera Sri Lanka’s domestic dairy industry is at risk of collapsing as dairy farmers campaign for an increase in fresh milk prices to survive ever-increasing production costs. Small dairy farmers charge that the Government is only offering relief to friends who run large-scale dairy farms, pointing out that challenges faced by the two are different.  Recent reports in the media showed vendors claiming that prices of milk products such as yoghurt could increase by as much as Rs. 10 as a result of the increasing cost of living and the poor economic conditions in the country.  All-Island Dairy Association (AIDA) Head Binesh Panawala told The Sunday Morning that the cost of production had increased due to the rise in the cost of raw materials needed to produce animal feed.  “Price increase will depend on production cost and is related to the supply chain. The Government has given permission to import some volumes of feed requirements such as maize. That is a positive side. But the main issue is regarding the procurement of feed material – the concentrate. Last year a litre of feed was Rs. 50 but now it has gone up to around Rs. 110. In addition, material quantities are also very limited. The price of maize has also gone up and there is a very limited amount of maize available in the market.”  However, he assured that the association would not increase prices in milk products, adding that it was not up to the association to decide on such matters. “There’s nothing called a price increase across the board or having an MRP or anything like that. Individual companies will decide whether they need to increase prices. This will all depend on production costs. AIDA doesn’t have the mandate on price increases. We are looking to make this industry better.” Small dairy farmers impacted However, small dairy farmers appear to be affected the most with the current economic climate.  The National Centre for the Protection of Dairy Farmers charged that the dairy industry had collapsed and that promises by the government were not being implemented.  “The local dairy industry has collapsed – particularly with the current economic conditions of the country; but also due to longstanding issues. Minister of Finance Basil Rajapaksa promised to provide support to us, but these promises have not materialised. He received Cabinet approval for a proposal to get 4,200 cows to be given to small dairy farmers, but what we have got to know is that these cows will be bought and then given to the dairy companies instead of us. A decision has been taken to give 7,800 acres to five companies and give these 4,200 cows to them. But the small dairy farmers still have not been allocated their own pastures for their cows. We have to keep moving to different places for our cows, facing many difficulties. The most recent incident was when a dairy farmer in Nochchiyagama took his herd of cows near the Wilpattu Wildlife Reserve and the Department of Wildlife arrested him and filed charges,” National Centre for the Protection of Dairy Farmers National Convener Susantha Navaratne told The Sunday Morning.  He charged that the Government had no intention of developing the local dairy industry and supporting dairy farmers.  “Sri Lanka only domestically produces 35% of the required milk. The remaining 65% is imported. There is ample room and potential to increase domestic production above 35% but there is no initiative or motivation from the part of the Government. The Government must take steps to strengthen local dairy farmers by providing us with the basic needs we’ve been requesting. This is not happening, and the local industry has collapsed; now the Government is begging the international community for milk products.”  He said the cost of production had increased drastically with the Government so far failing to provide even the smallest of assistance.  “Even though the Government claims it wants to develop the dairy industry, it has not done even the bare minimum such as providing grazing land for small dairy farmers and increasing the price at which a litre of milk is bought from us. The cost of producing milk has increased exponentially for dairy farmers. Prices of animal feed, worm medication and other medicines, and vitamins have increased, so as a whole the industry has now collapsed.”  He said in addition to production cost, other issues faced by farmers – such as the dearth in veterinarians – were being ignored.  “We have continuously been fighting for the issues faced by the dairy industry. More issues have come up now. There are vacancies in the veterinary cadres, there are vacancies among the animal welfare instructors, and there aren’t adequate fuel allocations for veterinary services so they cannot attend to sick animals. Only Rs. 10,000 is allocated a month for fuel. When animals get sick the farmer has to pay for the vet’s transport to bring him to the farm and this costs an additional Rs. 2,000 because the farms are in remote locations. Dairy farmers are struggling to survive and the Government is not intervening in any way to help.”  He charged that larger dairy companies were benefiting from Government assistance instead as they had cultivated friendships with politicians to gain favour.  “The Government is helping its friends in the big dairy companies by giving them acres of land and new animals. A good example is in Anuradhapura, where 1,000 acres were given by the Government to the Pussella Farm company,” he charged.  Price hike demands He said that dairy farmers were demanding a milk price increase to meet the increase in the cost of production.  “We demand a price increase at which milk is bought. Currently,  milk is bought between Rs. 80-110 per litre from a dairy farmer. But the production costs have increased. Cost of sugar has increased, so have the costs of tea and essential items. What the dairy farmer is earning now is not enough to survive. For a small-scale dairy farmer to survive in the industry, a litre of milk should be Rs. 130 at least,” Navaratne opined.  Responding to AIDA’s assertion that there was no need for a price increase, Navaratne charged that it was because they did not face the same challenges that small dairy farmers did.  “The dairy companies may say there is no need for a price increase because they don’t suffer the way the small dairy farmers do. They don’t face the production cost issues that dairy farmers face because of the increase in costs of things like animal feed and medicine. These companies also don’t face the issues of the rise in cost of living with the significant increase in essential food items. So it is a must to increase a litre of milk to Rs. 130. We reject the remarks made by the All Island Dairy Association.”  However, he noted that if the Government provided the relief demanded by Dairy Farmers, there would be no need to increase  the price of milk.  “But the Government is not doing anything; it is not providing us relief nor is it increasing the price.” Programme to develop dairy Meanwhile, State Minister of Livestock, Farm Promotion and Dairy and Egg Related Industries D.B. Herath, said that a Government programme was underway to help selected dairy farmers and that Rs. 1 billion had been allocated to develop the local dairy industry.  “There’s a programme already in place to develop the dairy industry. Under this programme dairy farmers who receive assistance from the Government both financially and in other forms will be selected. Our main focus is to increase milk production. Rs. 1 billion has been allocated for this programme. We will provide financial assistance to grow pastures and build sheds and infrastructure for water facilities and meet the other needs they have.” He assured that there would be no increase in prices and that there was no need to implement a price control for milk products.  “At present there are some who buy milk at Rs. 130 per litre from dairy farmers, but this still hasn’t resulted in an increase in production. There won't be a need to implement price controls just yet.”  


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