Milking it: Dairy industry set to surge off higher incomes

The dairy is set to grow significantly on rising domestic incomes, with domestic consumption set to double in the next eight years, according to experts. Poorer segments of society consume little dairy, but experience from neighbouring countries show that products like yogurt, milk and ice cream are snapped up quickly as incomes expand.

With growing foreign interest from firms like Thailand’s large producer Dutch Mill, the dairy industry is set for take-off, said U Than Hla, executive advisor of the Myanmar Livestock Federation. More than 150,000 cows in Myanmar are producing milk for consumption, leading to the rise of domestic brands like Ngwe Sin Parel and Arr Man. However, production usually takes place on small-scale farms, and processing quality is still relatively low.

A robust dairy sector will require growing income levels – an experience other regional countries such as Vietnam and China have also undergone.

“To look at the prospects for dairy sector development, we need to look at middle and high incomes because they have strong demand – people with lower incomes can also consume dairy products but it will be difficult for them,” said Jan van der Lee, senior adviser at Netherland’s Wageningen University and Research Centre.

The dairy industry has also gained interest from leading Myanmar business. Singapore-listed Yoma Strategic Holdings signed a memorandum of understanding in March with First Myanmar Investment public company and PMM Partners to develop a local dairy business. The investment is expected to be of US$46 million over five years.

Meeting the milk market
While domestic dairy consumption is set to double in eight years, it is not a given local farmers and processors will benefit. Unless the domestic industry improves, increase consumption could be met by imports, and a large number of hurdles presently stand in the way of dairy farmers and factories.

Mr van der Lee visited Myanmar through a program support by the Myanmar Livestock Federation, Wageningen University’s Livestock Research Institute and the Dutch government, looking at what needs to be done to improve the industry.

“We see that the sector will grow, and policies are needed on the farm level and on the company level,” he said. Farmers need to have access to land to provide grass and forage to cattle, but also need support and advice. However, land around Yangon is currently used for rice and vegetable production, but if a local dairy industry is going to grow, it will require more local land given over to cattle. Areas like Mandalay have more grassland available to support cattle farmers.

“You cannot produce milk in Kachin State and consume it in Yangon,” said Mr van der Lee.

One of the biggest competitors to fresh milk will be imported milk powder. As it is convenient and lasts longer, it can be difficult to compete with, particularly if it is accepted as a similar product to fresh milk.

While powdered milk doesn’t spoil, fresh milk needs to be produced from cows close to factories.

Domestic production will also soon be challenged by duty-free imports from other ASEAN countries under the 2015 Free Trade area, making it difficult to foster a domestic industry. A ban on imports would likely be counterproductive anyway, as it would protect a potentially unviable domestic industry.

“If you have better farming practices and farmers know what to do, and if we can produce more forage and cattle get healthier and can produce more milk, then farmers will get more income and dairy production will grow,” he said.

Mr van der Lee said foreign competitors such as Nestle may open factories here, but if they are not sourcing locally, it will not have significant trickle-down effects on the economy. “This is a challenge for the dairy sector and the farming community,” he said. Producers like Nestle require consistent production if they are to produce locally – otherwise they are forced to import.

“There are a lot of local investors in places like Mandalay, Nay Pyi Taw and Yangon,” he said. “We see a lot of businesses starting farms and producing milk.”

Dairy production is still quite low, requiring improvements in areas like land and water availability, electricity and feed supply to improve domestic milk production.

These are also the areas that need to be improved to attract foreign investment to the sector. Currently more than half of milk in the main dairy areas of Sagaing and Mandalay Region are used to produce condensed milk at local factories. Locally produced milk is often less healthy and includes more sugar than comparable regional produce, highlighting the need for fresh milk production.

One way to increase the amount of domestic dairy consumption is to promote it among young people, as it is particularly beneficial for children, said Mr van der Lee.

Convincing farmers to switch from rice to feed
Although there are strong growth prospects for the domestic dairy industry, it has significant hurdles to overcome. U Kyaw Ko Ko Khaing, a Thone Khwa township-level officer with the Livestock Breeding and Veterinary Department in Yangon region, said many farmers at present view growing rice and beans as more profitable than growing the grass necessary to feed cattle. Although Thone Khwa township is only about 24 miles (38 kilometres) from Yangon city, it may be tough to convince farmers to change their crop.

“Farmers choose to cultivate rice and beans rather than producing milk because the crops are easier to grow and gain a profit,” he said.

U Than Hla said he supported policies that promoted rural development, such as access to land and increasing rural electricity supplies.

“There’s no need to ban imports to promote local milk production growth, but to compete with international brands, policies should be aimed at promoting local milk production in areas such as taxation,” he said.


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