Dairy farmers find the current retail rates unattractive
Dairy milk is in short supply in various areas of Karachi, especially North Karachi, New Karachi, and Baldia. The decreased supply and high demand have been linked to the changing tea-drinking habits of people in Balochistan.
At most places in Karachi, milk is unavailable at shops after 10am while in other parts of the city, retailers have arbitrarily increased the milk rates, a survey by SAMAA Digital revealed.
At the beginning of September, milk was being sold at Rs5,500 per 40 liters but it is now being sold at Rs6,000 per 40 liters.
Early this month, distributors and dealers tried to increase milk rates, but the move was neutralized by retailers who refused to cooperate. Court cases were among the major factors which kept the milk prices in check.
Milk sellers said that dairy farms were supplying in accordance with their contracts, but they were not providing any extra supply. “This is creating a shortage,” a milk seller said.
Owners of dairy farms complained that input costs had increased manifold and their profit margin had dwindled to almost nothing. “Our savings have vanished this is why the milk production had decreased,” a dairy farm owner told SAMAA.
Wholesalers play a stereotypical role in almost all sectors, barring dairy. In other sectors, wholesalers are the ones who buy from supplier firms or distributors and in turn sell it to retailers at a premium. They have no problems acquiring goods from the market.
However, this is not how the dairy sector works. Here a surge in demand or dwindling supply could spell disaster for wholesalers. Dairy farm owners also face problems in selling milk in bulk quantities. Therefore, they sign annual contracts (January-December) under which dairy farms are liable to sell milk to wholesalers in specified quantities and wholesalers bound to purchase that quantity.
In case there was a reduction in dairy farm output, the wholesalers could buy milk from the open market, charging the difference from the dairy farms. In this way, wholesalers would be able to overcome any potential shortage. However, he is liable to buy in specified quantities even if his demand decreases and forced to sell at reduced rates even if he buys milk at higher price.
Every wholesale dealer pays between Rs200,000 and Rs500,000 per 40 liters as ‘deposit money’ at the time of contract signing. The contract is for a specific quantity and when there is a fluctuation in prices, they bear the difference.
Wholesalers also own vehicles for the supply to the market. When a deal is struck on the price, dairy farm owners also try to protect the wholesaler’s interests.
Although the milk price was fixed by the government at Rs94 a liter, it is mostly sold at Rs130 per liter. But dairy farm owners are unhappy and seek an Rs20 increase in the retail milk rate.
President of Dairy and Cattle Farmers Association Shakir Umar said that dairy farmers were unable to continue milk supply without an immediate increase.
Representative of the Retailers Welfare Association Abdul Waheed Gadi said that they understood problems faced by dairy farmers, adding that they knew that fodder and fuel rates had substantially increased while cattle prices had also increased.
Gadi told SAMAA Digital that the demand had increased while milk originating from rural areas of Sindh also did not reach dairy markets in Karachi or Hyderabad. “Almost all of the milk (from rural areas) is sold wherever it is produced,” he said.
According to him, the hike in demand was driven by increased demand from Balochistan where milk tea had started selling in substantial quantity. Most dealers accumulated milk in Karachi before supplying it onward to Balochistan, he said.
He maintained that dairy farmers actually found the current rates unattractive and that was why they were not buying more buffalos that in turn was creating a shortage.
Dairy farm owners not only take money from wholesalers (in terms of advance against milk supply), they also invest money in livestock. Investors get Rs30,000 on every Rs300,000 while they get profit and the principal amount in four to five months.
A wholesaler told SAMAA Digital on condition of anonymity that most investors were after profits and they had nothing to do with dairy milk. “They collude with government officials to increase milk prices … They are also involved in adulteration. In many areas, the milk contains around 50% water. They are actually involved in selling water at Rs130 a liter,” he said.