You recently visited India, and I am assuming that you have had a good observation of the dairy sector in the country. Kindly share it.
It is very clear that the country has enormous potential to become the largest and, hopefully in time, one of the most efficient dairy producing countries. I have traveled from the northern part of the country down through central India and to the south, and saw many enormous opportunities in terms of how land can be better utilized, how dairy cattle can be better managed, how milk can be better processed, and how the markets can be better served. There are already some good examples of the dairy value chains working but, unfortunately, many of the opportunities for small farmers are not being realized. There needs to be significant changes to many parts of the dairy value chain. Shared value and transparent links from farms through feeds and services, milk collection, processing and markets, is critically important to developing the dairy sector in India. For far too long, the milk processors that do exist do not support the small holder farmers in a way that results in the expansion of their enterprises and the production of better quality milk.
To what the low efficiency in the dairy sector can be attributed? And what should be done to overcome it?
The low efficiency in the dairy sector can be attributed to a number of factors. The first fundamental of improving the efficiency must start at the farm and with the dairy cow or the buffalo. For an animal to be efficient in terms of utilization of feed and then milk production, it must receive a balanced ration of digestible nutrients and feedstuffs. As I have traveled around India, I have seen cows being fed extremely low energy and low protein diets and it is not surprising that they only produce one to three liters of milk. If that same cow was fed a balanced diet, it could probably produce 15 to 20 liters of milk a day. That is a huge increase in efficiency. It’s not complicated to put together balanced rations but it does require modern analytical technology. It’s now relatively simple to take a sample of say grain or forage and do an analysis on it to determine the feed and nutrient levels.
The next step in improving efficiency relates to the management on the farms. For dairy cows to produce good quality milk, they have to be kept in clean conditions and have access to shade and fresh, clean water. Once a cow is producing a reasonable volume of a good quality milk, that needs to be cooled rapidly to prevent deterioration. This is another area where, a lot of milk is wasted because it simply goes bad before it is fit for consumption.
venture | dairy is working closely with Akshayakalpa Farms group in Karnataka, a private sector initiative to incubate rural-entrepreneurship based business models in the Indian agricultural landscape. Currently, they are developing a model where farms of up to 25 cows are being properly constructed with modern milk equipment. Cows are being fed properly and as soon as the milk leaves the cow, it is going straight to a cooling tank so that the quality is preserved immediately. It’s currently estimated that some 70 to 80 percent of all the milk that is produced in India is not going through formal processing channels and this results in problems including contamination and adulteration of the milk.
What criteria do you consider before investing in a dairy firm?
First and foremost, when one is looking for investment, the people are most important. The success of any business is totally dependent on the caliber of the people who are running and working in the business. We are looking for firms where there is really strong leadership. We identify what we call a Level 5 Leader and that is someone who is more interested in the outcome of the business, its employees, its customers and its suppliers than in just making money for the sake of it. We also, of course, need to make sure that the firm’s business plan is sound. Frequently, the business plans need to be analyzed in detail, including the risk and reward, to make sure that there are no false assumptions. Today, any aspect of the dairy value chain requires quite complex technology and there needs to be people who can thoroughly understand such technology. So in the end, one is basically betting on a team of people who have the ability to “get the job done.”
What kind of government intervention would you like to see in India in order to help stimulate growth in the sector?
The government has a very important role to play at several levels. For any industry to be successful, it has to have access to capital. One of the first things that government can do through the banking network is make sure there are proper mechanisms in place to enable farmers to borrow money to expand. This is also where responsible milk processing companies can play an important role by working together with banks and governments to find mechanisms to provide loans to farmers against future deliveries of milk.
The next role government can play is to make sure that there are high standards set for all parts of the dairy value chain. There should be standards for hygiene and quality of milk at farm level, and these should be enforced. There should also be strong enforcement of hygiene standards in milk processing plants.
Government should also provide information about sustainability of the dairy industry. It is not going to be acceptable for cows to only produce three liters of milk when that same animal is capable of producing 15 liters. Government needs to help provide the wherewithal for education and extension to farmers so important information with regard to management, husbandry, marketing and so on are available.