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ECONOMIC ANALYSIS OF MILK PRODUCTION, PROCESSING AND MARKETING IN KADUNA STATE: A CASE STUDY OF THE MILK COOPERATIVE PRODUCERS’ ASSOCIATION LIMITED (MILCOPAL).
ABSTRACT
This study analyses the economics of milk production, processing and marketing under the smallholder Milk Cooperative Producers’ Association Limited (MILCOPAL). It is a contribution to knowledge in the area of pastoral milk cooperatives in Kaunda State. The specific objectives of the study were, to describe the socioeconomic characteristics of the pastoralists milk producers and suppliers in the smallholder dairy cooperatives, determine the efficiency of resource-use and profitability of milk production, describe the method of milk procurement and processing. The study also determined the efficiency of resource-use, marketing margin and profitability of yoghurt production by the MILCOPAL and identified the problems associated with milk production, processing and marketing under the smallholder Milk Cooperative. A field survey was conducted in Kaduna state from January 2004 to May 2005. The analytical techniques used for the study were the descriptive statistics, production function analysis, net farm income analysis and marketing margin analysis. Also, four hypotheses were tested. The results revealed that, pastoralists in the programme were grouped into milk producers and suppliers. The results of the socioeconomic characteristics of the producers revealed that their average age was 48 years, with an average herd size of 61 animals and up to 35 years cattle rearing experience. Results of the socioeconomic characteristics of the milk suppliers, revealed their average age as 30 years, 51% supplied less than 10 litres of fresh milk weekly and they all sold their milk to MILCOPAL at N30.00 per litre. With respect to the resource-use efficiency and profitability in pastoral milk production, the “Cobb-Douglas” regression results showed that three variables – number of lactating cows, feed and labour were significant at 1% level of probability. Also the Fratio was significant at 1% level. This led to the rejection of the hypothesis of the study, which stated that there is no relationship between milk production and inputs used. All the inputs used in milk production were inelastic, because their elasticities of production were less than one. Returns to scale for all the inputs was 0.997, which implied that there was almost an equal increase in output from an equal increase in the inputs (constant returns to scale). The efficiency ratio was less than one for all the variables, which implied over utilization of resources. Profitability analysis of small scale milk production, showed a gross margin of N3, 951.82 and a net farm income of N2, 985.74 per week from an average of 30 lactating cows. The hypothesis of the study – milk production was not profitable was rejected based on the results of the test of significance of the differences between revenues and costs used in milk production. Procurement officers usually leave for the various collection centres in the morning, where milk suppliers converged with milk for measurement and necessary tests. The amount supplied by each woman recorded; N30.00 was paid per litre of milk and N2.00 paid as commission to the cooperative association. The milk was then transported to the plant for processing into yoghurt and other dairy products. With respect to efficiency of resource-use in milk processing into yoghurt, the “Cobb- Douglas” regression results showed that the variables (milk, labour and culture) included in the model were statistically significant at 5% level of probability, sugar was not significant. All the inputs used in yoghurt production were inelastic, because their elasticities of production were less than one. The marketing margin of yoghurt was 60.81%. The gross margin per week was N257, 994.46 and the net farm income was N199, 762.21. The null hypothesis of the study, yoghurt production was not profitable, was rejected based on the test of significance of the differences between the revenues and costs involved in yoghurt production. Problems associated with milk production, collection, processing and marketing, range from insufficient supplementary feed during the dry season and its expensive nature, low producer prices for milk, insecurity, high prices of drugs and vaccines, problems of low milk yield. Problems of MILCOPAL include; poor road network, high cost of transportation, fresh milk adulteration, seasonality of demand and production, diversion of milk when supply was lean, high cost of production, power failure, lack of modern processing and storage equipments.
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