Market Milk

Module 4. Procurement of milk

Lesson 6
MILK COLLECTION SYSTEM AND PRICING POLICIES

6.1 Introduction

In most of the developed countries, production of milk is confined to rural areas, while demand is mostly urban in nature. Hence, the milk has to be collected and transported from production points to processing including chilling centers and distributions points in cities.

In rural India, milk production is largely a subsidiary activity to the agriculture in contrast to organized dairying in Western countries. Small farmers and landless labourers usually maintain 1-3 milch animals. As a result, small quantities of milk are produced, in a scattered manner all over the country. This situation makes the task of milk collection complex.

With the growth of the organized dairy industry in India, a trend towards establishing modern farms has gained momentum for milk production with a herd of 100-300 cows/buffalo in line with the practice adopted in advanced countries. These farms have the facilities of machine milking and bulk milk cooling.

6.2 Milkshed

It is the geographical area from which a city dairy receives its fluid milk supply. The allocation of definite milk sheds to individual dairies for the purpose of developing the same is now being considered in India.

6.3 Rural Milk Collection

6.3.1 Undertaking extensive surveys in the milkshed area to establish a dairy plant

Availability of milk at various collection points is ascertained based on

• The number of animals

• Future potential of milk availability, and

• The presence of the competitors

6.3.2 Route planning

• Taking into account milk availability,

• Road access to collection points and their distance from the site of the dairy plants.

6.3.3 Planning the location of the primary collection and chilling centers

6.4 Type of Systems

In India, four systems of milk procurement (viz., Direct, Contractor, Agent and Co-operative systems) are popular. The organized sector with 575 processing plants and milk product factories in the Co-operative, Public and Private sectors has not captured major share in the milk trade which is still dominated by the traditional sector. It has been estimated that about 67% of total milk production is marketed, out of which 51% is the share of traditional channels and remaining 16% is through the organized sector. The low capital demands of traditional systems make it hard to replace. The organized dairies collect milk through one or combination of the following systems:

6.4.1 Direct system

In this system, organized processor (Public, Co¬-operative or Private) collects milk directly from the producers by establishing village procurement centers.

6.4.2 Contractor system

The processors purchases milk from the contractor according to the terms of contract such as quality, quantity, price, etc.

6.4.3 Agent system

The processor appoints agents to procure milk in particular area. Payment for the milk is made directly to the producers while the agent gets the commission.

6.4.4 Co-operative system

At the village level, the farmers form a co-operative society, which establishes the milk collection centres’. The society collects milk twice a day and delivers it to the milk collection centres where the milk is weighed, tested and the price paid to farmers. The payment is based on fat content or fat + SNF content in the milk. The village society supplies/sells milk to its own District co-operative dairy plant. It transports milk in cans by trucks or through insulated road milk tankers, preferably via a chilling centre. Besides milk collection, the society also provides the technical input services such as the A.I, veterinary aid; concentrated cattle feed and fodder seeds. They also give counselling to the society members to enhance milk production.

6.5 Chilling Centres/Bulk Milk Cooling Centres

If the dairy plant is far away from the collection centre, then the collected milk is first brought to a centralized chilling centre/ bulk milk cooling unit. Here, milk is cooled to 4°C and stored in insulated storage tanks of 5000-20,000 L capacity. Subsequently, the chilled milk is transported in insulated Road milk tanker to the dairy plant. The transportation of milk from the chilling centre to the dairy plant usually takes place once a day.

6.6 Efficiency of Systems

Each system has its own merits and demerits. The efficiency of any system can be measured through analysis of various indicators like:

• Regularity in milk collection

• Efficiency of milk collection in lean months to the milk collected in flush months

• Quality of milk procured

• Cost of milk procurement

6.7 Problems of Milk Procurement

In order to make plants financially viable and sustainable, the procurement system has to be such that the plant runs efficiently. The principal problems in milk procurement which have a direct bearing on capacity utilization and operational efficiency are well recognized. The major problems listed below demand managerial skills to ensure adequate milk supplies to dairy plants, throughout the year:

• Perishable nature of commodity, improper cleaning of milking vessels, hind quarters of animals, udder of the animal and the barn.

• Commitment for lifting small surpluses of milk from thousands of farmers.

• Wide fluctuations in milk output based on seasons.

• Procurement of milk from farmers – members and non-members of the co-operative societies, problem of payment of price and sharing of inputs.

• Lack of infrastructural facilities like cooling at village level, unreliable electricity supply, non-availability of spare parts of machinery. Due to these about 2-5% of milk received is C.O.B. positive especially in summer.

• Poorly developed roads and transportation systems cause undue delay in milk procurement

• Cost of chilling and transportation is high.

• Procurement problems are more specific to hilly regions, drought prone areas, tribal areas, forest, etc.

• Quality of raw milk; chemical and microbiological hazards; cleaning of milking utensils and sanitation of milking areas.

• Problem of adulterants, neutralizers, preservatives, pesticides, antibiotics and other additives in raw milk.

• Unhealthy competition among vendors, contractors, co-operative milk unions and other agencies engaged in milk procurement; administrative demarcation of zones under MMPO for each plant is of no practical help.

6.8 Pricing Policy for Raw Milk

The price of raw milk determines the level of profit, so it plays a crucial role in encouraging milk producers’ to produce more milk per animal and per household. Productivity, composition and marketable surplus of milk vary from animal to animal, season to season and place to place. A good pricing policy for raw milk collection has to take care of three variations as given under.

6.8.1 Seasonal variation

This is due to seasonality in calving, availability of green fodders and climatic stress. From the pricing point of view, there are four seasons:

• Flush - November to February

• Transitory to lean - March and April

• Lean – May to August

• Transitory to Flush - September and October.

6.8.2 Compositional variation

Fat and SNF are two major constituents of milk which are considered for price fixation. The '2-axis pricing policy’ gives importance to both fat and SNF; the per Kg (rate) price of fat and SNF are fixed in that ratio at which these occur naturally i.e. around 2/3 of fat per kg price for each kilogram of SNF. This type of pricing discourages adulteration. Basic price is fixed for basic composition and for each 0.1 additional value, bonus is added and for shortfall deductions are made.

6.8.3 Spatial variation

Price of agricultural commodities varies from region to region. Milk producers near cities get more price than those located far off. Procurement cost of milk can be minimized by getting more milk from nearby areas or obtaining milk from existing milk shed areas.

6.9 Rational milk pricing policy

• A guaranteed price and market to the producers’ throughout the year

• A regular supply of wholesome milk at a reasonable price to the consumers

• An attractive margin of profit to the milk processors and product manufacturers

6.10 Fixing the price from producer’s viewpoint

The price should be related to the cost of milk production. The system must ensure a fair margin of profit to the producers. Due consideration has to be taken about seasonal variations in production (supply) and demand, consumer’s price index based on market trends.

6.11 Fixing the price from milk processor’s viewpoint

Price fixation should consider the following:

• The stage of operation of the plant

• Plant capacity utilization

• The market objective of the plant

• Consideration of the size of the population that is to be covered by the milk scheme

• Distribution of people in different occupational and income groups that are to be served

• Total cost of transportation, processing/manufacturing and distribution

6.12 Pricing Systems

Various pricing systems functioning in the country for milk procurement are given below:

6.12.1 Pricing on fat content

A very large section of dairy industry is buying the milk on fat basis, disregarding the SNF content of milk. This is practiced by most private dairies. The advantage involves discouraging adulteration with water or separated milk or, mixing of cow milk with buffalo milk. A disadvantage of this system is that it discourages production of cow milk. The price paid per kg of fat was Rs. 425/- in 2011.

6.12.2 Pricing on volume or weight

This method is also known as flat rate. It saves time and is simple to calculate but encourages adulteration i.e. watering or skimming. It is popular in the unorganized sector.

6.12.3 Pricing on total milk solids

The traditional milk traders generally price the milk on the basis of total milk solids. They consider the yield of Khoa to be produced from the milk to be purchased. This system encourages partial skimming or adulteration with cheaper non-milk solids.

6.12.4 Pricing on species of milch animal

In this system, consideration is given to the species of animal from which the milk is obtained i.e. cow or buffalo. Normally buffalo milk fetches more price than cow milk. This system encourages the adulteration of buffalo milk with water or cow milk.

6.12.5 Pricing as per cost of milk production

The price should be related to the cost of milk production and ensure a fair margin of profit to the producer. It should take into account the seasonal variation in production and demand.

6.12.6 Pricing according to the use of milk

This practice is followed mainly for milk products. Milk procurement for a specialized dairy product such as cheese requires selection of raw milk by avoiding mastitis, colostrum, late lactation, and antibiotic-free milks. The milk should be free from detergents, sanitizers, pesticides, insecticides, aflatoxins, mycotoxins, heavy metals and even off-flavours.

6.12.7 Two-axis pricing of milk

Liquid milk plants have a differential pricing system for flush and lean months based on the fat and SNF content of milk, with provision for the payment of a premium for a higher fat and SNF content than the specified standard. According to this pricing policy, the price of milk is calculated by fixing a predetermined rate for fat and SNF. This system discourages adulteration and provides a common pricing approach to both cow and buffalo milk. The requirement by Food Safety and Standards Rules (FSSR) - 2011 (erstwhile PFA) for cow milk is 3.0% - 4.0% fat and 8.5%-9.0% SNF while those for buffalo milk 5.0%-6.0% fat and minimum 9.0% SNF throughout country. This is done with a view to encourage the milk production through high-yielding indigenous and cross breeds and to give adequate incentive for production of cow milk. In this context, National Dairy Development Board (NDDB) has suggested the ‘two-axes milk pricing’ policy.

6.13 Two Axes Formula

India has been producing large quantities of buffalo milk when compared with any other country. This milk being rich in fat content always attracted good price in comparison to cow milk. The fat portion being visible (giving thickness), separable (yielding cream) and measurable (in percentage) made it easier to decide milk price.

6.13.1 Kilo fat system

A system based on ‘kilo fat’ became a practice for purchase of buffalo milk. Under this system, an amount in rupees per kg of fat means an amount payable on that quantum of milk which would yield one kg of fat. For example, when the rate per kg fat is Rs. 425, it means that the said amount will be paid for 16.66 L of buffalo milk with 6% fat (minimum standard):

1 kilo (1000gm) fat ÷ 60 gm/L (6%) = 16.66 L

On this basis, the price per L works out to: Rs 425 ÷ 16.66 = Rs 25.51/ L

If cow milk with 3.5% fat (min standard) were to be purchased under kg fat system, it would fetch Rs 7.70 per L as shown below:

1000 gm ÷ 35 gm/L (3.5%) = 28.57 L
Rs 425 ÷ 28.57 = Rs. 14.87/L

This works out to 58% of the rate paid for buffalo milk, an injustice to cow milk producer.

6.13.2 Double axes pricing

With a view to pay for buffalo milk and cow milk on the rationale of their two components, viz. fat and SNF, a system was devised called as Double–axis milk pricing. The purchase rate for fat and SNF are determined based on previous experience or ruling market prices/ consumer appreciation for buffalo milk fat (white ghee) vis-à-vis cow milk fat (yellow ghee) and for buffalo milk SNF vis-à-vis cow milk SNF (i.e. SMP). Accordingly, the difference between prices paid for buffalo milk and cow milk is reduced. Suppose the rate of Rs. 425 per kg fat (which can neither be purchased nor it is the selling rate for ghee normally) is translated into Rs. 190 per kg fat and Rs. 158 per kg SNF, then the purchase price for buffalo milk and cow milk is determined as shown below:

Table 6.1 Purchase price for buffalo milk and cow milk

*Calculated in grams per L of milk × price per grams of component.

In this way, the cow milk is paid to the extent of 78% of the rate for buffalo milk. This also matches with 80% TS in cow milk compared to buffalo milk.

Note:

• A ready reckoner can be prepared depending on actual rates decided from season to season. For every 0.1 % increase in fat and SNF, the value per L can be worked out for buffalo/cow milk.

• In above calculation, volume to weight conversion has not been considered. For calculation of kg fat/kg SNF, the milk volume is to be multiplied by specific gravity and the weight thus arrived is multiplied by fat or SNF % and then divided by 100. However, under the Anand Pattern, farmers are paid on volume and the DCS is paid on weight basis. Hence, the above calculations holds good and serves as a guideline to pay the farmers.

• Incentives for quality milk production are sometimes given in form of premium price offered based on microbiological tests such as MBR and Resazurin Reduction.

6.14 Milk Collection Centre

The information collected in the survey form has to be analyzed to understand the pattern of dairying in that village for establishing the milk collection centre. These include:

• The breeds of cows and buffaloes

• The number of animals in milk and dry

• The level of animal husbandry practices

• Lactation period

• Availability of green and dry fodder

• Artificial insemination

6.15 Daily Routine in Milk Collection Centre

• Organoleptic testing of milk wherein stale, sour, adulterated milk shall be rejected.

• The timing of milk collection shall have to be adhered to

• Milk procurement should be in both the shifts (morning and evening). Unless cooler or bulk cooler is used at the Milk collection centre (MCC), milk should be transported to the dairy in each shift.

• The farmers should be trained to carry milk in clean vessels, and the milk cans at the MCC should be cleaned adequately.

• The milk samples should be tested for fat content and SNF. A trained person should be assigned such task and should be supervised.

• The route vehicle should reach the dairy dock at an interval of every 20 min. All the vehicles should report in such a fashion that the milk reception is over within the stipulated time.

6.16 Raw Milk Reception Dock

• The milk cans are loaded on conveyor in a specific sequence and each can is inspected for abnormal colour, taste, smell, etc.

• A sample is immediately checked for Clot-on-Boiling (COB) test and the milk is received MCC-wise and samples are drawn for further testing in the laboratory. These samples are checked for acidity, MBRT, and for adulterants like sugar, starch, urea, soda, water, preservatives, etc.

• The results of milk weight, fat and SNF percentage are communicated to the MCCs through the transport vehicles on a ‘truck sheet’. It brings information filled in by the MCCs regarding the vehicle arrival and departure time, number of milk cans sent and complaints, if any. Potassium dichromate is usually used to preserve the sample for analysis.

• If the acidity of the collected milk is more than 0.15% lactic acid (LA), it should be treated as sour milk. Methylene Blue Reduction Test (MBRT) of the raw milk at the time of reception should be minimum 30 min.

6.17 Equipment at the Milk Collection Centre

• Milk collection tray

• Milk strainer

• Milk sampler

• Sample bottles

• Sample bottle tray

• Milk measures: 2 L/ 1 L/ 0.5 L/ 0.2 L

• Plunger

• Al alloy/plastic milk cans

• Plastic bucket and mug

6.18 Equipment and Glassware for Milk Testing

• Gerber centrifuge

• Butyrometers with stand

• Butyrometers shaking rack

• Lactometer with jar

• Thermometer

• Milk pipettes with stand

• Acid bottle with tilt meaure

• Alcohol bottle with tilt measure

• Lock stopper

• Jerry cans for acid/ alcohol

6.19 Registers

• Pass books/monthly cards

• Purchase registers

• Testing note book

• Payment registers

• Members’ registers

• Cash book

• General ledger

• Dead stock register

6.20 Sophisticated Equipments used in Milk Collection Centers

6.20.1 Electronic milk tester

This instrument measures fat percentage, which is displayed quickly and accurately on a digital readout. It follows the system of dilution, mixing, homogenization and photometric measurement. It requires small volume of milk sample and can perform 120-150 tests per hour with auto zero facility. Its fat measuring range is 0 to 13%.

6.20.2 Electronic SNF tester

This instrument is designed to perform 100 tests per hour and it gives instant digital display without the help of a chart or table. It does not require any chemical and is microprocessor-based. Its SNF measuring range is 0 to 12%. It can be used in conjunction with Electronic Milk Fat Tester.

6.20.3 Portable milk analyzer

This instrument is designed to measure fat (0.5 to 12%), SNF (6 to 12%), protein (2 to 5%), density / corrected lactometer reading (20-40) and added water (0-60%) for milk sample in about a minute. It does not require chemicals and is suitable for cow, buffalo and mixed milks. It works on ultra-sound technology and is useful in field as well as in laboratory.

6.20.4 Infra red milk analyzer (Milko-Scan)

It was J.D.S. Goulden of the National Institute for Research in Dairying, Reading, England who demonstrated in 1961 that the difference spectrum of water and homogenized milk at 5.73, 6.46, 7.9 and 9.6 µ could be used to estimate percentages of fat, protein, solids-not-fat and lactose in milk.

6.20.4.1 Principle

The infrared milk analyzer measures absorptions of infrared energy by carbonyl groups (at 5.7 ?) in the ester linkages of fat molecules, by peptide (6.46 ?) linkages amino acids in protein molecules, and by hydroxyl groups (9.6 ?) of lactose molecules. The method is specific for measurement of intact fat, protein and lactose in milk. SNF is estimated by adding a constant to instrument values for protein and lactose, making this method more accurate and less time consuming than direct determination with the instrument.

6.20.4.2 Apparatus

A prototype infrared milk analyzer (Mark I IRMA) was developed in 1964 by the research and development section of Sir Howard Gruble Parsons, England. Development of the Mark 2 IRMA began in 1966. It had an improved optical design, automatic sampling and analysis combined with the various types of automatic reporting equipment. These instruments were the split beam, dual cell type which compared the infrared absorption of the sample to that of water at specific wave lengths selected by the prism or diffraction grating. The major limitations of these instruments were relatively long light path, complex optical system, relatively unstable infrared energy source, poor signal- to-noise ratio, moisture-sensitive detector, sensitivity to scattering, and outdated electronics (transistors and tubes) which were susceptible to decay. Most of these limitations were due to the state of art at the time the instruments were developed and, regardless of these factors, they worked well and were accurate enough to establish and serve in milk analysis.

In 1975, Foss Electric Co., introduced the first single cell, dual wavelength infrared milk analyzers (Milko-Scans 203 and 300). They used optical filters to isolate the specific wave lengths absorbed by fat, proteins, and lactose and reference wavelengths not absorbed by these components, thus eliminating the need for a diffraction grating. This approach was implemented to reduce water displacement and scattering effects. A number of other changes also were made, such as reducing the number of mirrors, shortening the light path, using lower energy and more stable infrared source, and using solid state electronics. The use of a single cell makes the instrument more susceptible to water vapour, and to circumvent this problem, it is provided with a moisture-proof compartment. These instruments also use automatic electronic corrections for cross interference effects and are capable of assessing one of two additional variables, either water or total solids.

The milko-scan 100 series represents a second generation of the single cell, dual wavelength instruments manufactured by Foss Electric Company. A number of changes were incorporated in this instrument based on the experience gained with the Milko-Scans 203 and 300. Some of the changes incorporated were removing the servo comb, reducing the number of mirrors from 9 to 2, using a thermostatted filter housing, relocating the chopper, improving transmission characteristics of the filters, and using an improved detector. All primary instrument-signals are processed electronically to apply the cross corrections which are set directly into the instrument. Like the Milko-Scan 203, the Milko-Scan 104 is capable of determining fat, protein, lactose, and water or total solids. But it is semiautomatic rather than a completely automatic instrument.

6.20.5 Electronic weighing scales

These weighing scales are available in various capacities from 2 kg to 500 kg.

6.20.6 Raw milk reception dock (RMRD) automation system

This system takes care of reception of milk in cans coming from several villages. The system is modular in nature, flexible and can be upgraded. It draws a milk sample and premixes it automatically and collects it in a bottle, which is sent to laboratory. After weighing, the milk is drained automatically into dump tank and the drain valve gets closed automatically. The weighing and milk testing data are displayed with single key operation.

The system involves Windows Server 2000/2003 Pentium IV, Windows 98 ME/XP nodes for milk testing station and weighing station, Milko-Scan or Electronic Milk Tester and networking accessories. The system provides various outputs viz. truck sheet, milk collection report, time management report, analysis report and a summary report.

6.20.7 Bulk milk cooling tanks

These tanks when loaded with milk can cool it down from 30°C to 4°C in 3 h. The tanks are available in 250 L, 500 L, and 2 to 5 KL capacity. The integral condensing unit is hermetically sealed and uses R-22 refrigerant. These are built with stainless steel and with agitator assembly, on/off switches for agitator and, cooling and digital display of temperature. A model is available which claims that it senses the quantity of milk in tank and proportionately switches on the required refrigeration system, saving energy.