Milking the market: Why are dairy prices soaring and who's to blame?

Prices have been surging across the board in recent months to compound the woes of consumers amid a cost-of-living crisis

Faysal Atikbdnews24.com
Published : 14 Nov 2022, 08:05 PM
Updated : 14 Nov 2022, 08:05 PM

Nargis Akhter, a resident of Dhaka's Pirerbagh, has been struggling to cope with soaring living costs. The rise in milk prices in the last few months has added to her woes as the mother of two needs the product for her children and parents-in-law.

“We need at least half a litre of milk a day. Now, it takes Tk 50 to buy two 250ml packets, which amounts to Tk 1,500 a month. It’s become difficult to spend so much in my current state," said Nargis, whose elder child is aged four while the younger one is just three months old.

Data from the Consumers Association of Bangladesh, or CAB, shows that all companies increased liquid milk prices by Tk 10 per litre to Tk 90 from July to October. And, since a 250ml packet is sold at Tk 25, the price of a litre runs up to Tk 100 for Nargis.

Companies that market milk say they have to pay more to dairy farmers than before due to a rise in cattle feed prices.

They also cited an increase in the profit shares of retail stores and marketers due to the rising costs of living.

But the benefits of the price hike are not trickling down to dairy farmers, who said companies are not paying them enough to cover the increased costs of fodder.

Besides Milk Vita, a government organisation run on a cooperative basis, PRAN Dairy, Igloo, Aarong Dairy, Akij Dairy, Aftab Milk & Milk Products and some other private companies market milk and dairy products at the national level.

In the four months since July, the price of liquid milk packaged by these companies has increased gradually by at least Tk 15 per litre.

Imported powdered milk has also grown costlier, with prices rising by at least 25 percent per kg in the last year.

As for imported brands, the price of Anchor powdered milk has increased from Tk 680 per kg in February to Tk 850 in October. The prices of Dano and Diploma climbed from Tk 680 to Tk 880, Red Cow to Tk 870, and Nido from Tk 800 to Tk 890.

Mosharraf Hossain Mintu, chairman of MH Group, a Chattogram-based powdered milk importer, said: "Currently, the imported powdered milk market is under pressure due to the surge in the value of the US dollar. Although the price of milk in the international market has come down slightly, the domestic market is not seeing its benefits as the dollar got stronger."

“A calculation shows that the price of powdered milk had to be increased by Tk 50-Tk 100 per kg in the wake of the dollar price hike. Under these circumstances, large companies increased prices more than small companies did due to higher operating costs.”

Kamal Kamruzzaman, director of marketing at PRAN-RFL Group, said the cost of collecting milk from farmers has risen. Margins had to be increased at the retail, dealership and distributorship levels as well as a consequence of the cost-of-living crisis, he added. “These factors have led us to readjust prices.”

Aarong Dairy increased the price of its milk by Tk 10 per litre in August to keep step with rising costs, including that of cattle feed, according to Mohammad Anisur Rahman, senior director of the dairy firm's parent, BRAC Enterprises. The company started paying farmers Tk 3.8 more for each litre at the time, he said.

Packaging and marketing costs have also increased by up to 40 percent, while a hike in fuel oil prices raised distribution expenses. “Milk cooling and processing plants need generator support longer than before due to power supply crunch."

Aarong Dairy's standardised milk has been priced at Tk 50 per 500ml and Tk 90 per litre, while a 500ml packet of pasteurised milk is sold for Tk 52 per and a litre for Tk 95.

THE GAP

Bangladesh produces more than 10.6 million tonnes of milk against a demand of 15.2 million tonnes annually, and 90 percent of the product comes from cows, according to the Department of Livestock. The country has about 100,000 commercial dairy farms.

Liquid milk production has seen more than a fourfold increase in the last 10 years. If this trend continues, the government hopes that the country will be able to achieve self-sufficiency in milk production by 2025.

Azizur Rahman, additional general manager of Milk Vita’s Shahjadpur unit in Sirajganj, said 700 registered cooperative members supply 40,000 litres of milk to the unit every day. It collects another 40,000 litres of milk from other sources. The unit pays Tk 46 for one litre of milk.

Shahid Ali, a leader of a cooperative society of farmers in Shahjadpur, said they supply 8,000 litres of milk to Milk Vita daily.

The farmers also sell milk to sweet shops, tea stalls and households at Tk 50-52 per litre, according to him.

However, Pradip Kumar Ghosh, a sweet shop owner, and Shahidul Islam, the proprietor of a tea stall, said they pick up milk at Tk 55 per kg.

Keramat Ali, a dairy farmer in Sadar Upazila, said he sells milk to homes in the villages at Tk 60 per litre.

But the price shoots up to Tk 90-100 per litre whenever it is sold in packets by the companies.

‘NO MONITORING’

Imran Hossain, president of the Bangladesh Dairy Farmers Association, says fodder companies have taken advantage of lax government monitoring mechanisms to raise product prices 'irrationally' by 50-100 percent in some cases.

He claimed that cattle feed prices in Bangladesh rose at a higher rate than in other parts of the world. “Bangladesh is the only country where husk is pricier than flour.”

Imran also alleged the milk companies raised prices for farmers by only Tk 2-3 per litre, whereas cattle feed prices doubled.

The rise in milk prices has not been substantial in light of the increased production costs, according to Motasim Billah, publicity secretary of Bangladesh Dairy Development Forum.

However, he called on the government to monitor the market in order to determine the rationality of the price hikes.

[Additional reporting by Israel Hossain Babu in Sirajganj; writing in English by Arshi Fatiha Quazi]

Toufique Imrose Khalidi
Editor-in-Chief and Publisher