Addressing forex crisis: Learning from Dutch dairy industry to boost production -Expert | Sunday Observer

Addressing forex crisis: Learning from Dutch dairy industry to boost production -Expert

29 May, 2022

It was a bizarre coincidence to stand in a queue to purchase three packets of Palawatte milk powder while I was visiting Sri Lanka as a member of the Dutch business delegation which is planning to invest in the Sri-Lankan dairy industry.

Milk and milk products have always been an integral part of our consumption habits. Milk is one of the most nutrient-rich beverages a human can consume. It contains a little bit of everything we need: calcium, vitamin D, riboflavin, vitamin B12, potassium, phosphorus, vitamin A, vitamins B1 and B6, selenium, zinc, and magnesium. In recent years, the demand for milk powder has increased as several countries have been unable to meet their rising milk demand and rely on imported milk which is procured in the form of milk powder.

Although fresh milk is considered the most popular beverage across the world, research showed that the level of milk consumption in Sri Lanka is considerably lower than in other countries with per capita consumption of fresh and powdered milk. There appears to be a shortage of imported milk powder once again in the market. This is led by the current foreign exchange crisis the country is facing. Lack of availability of local milk powder and fresh milk in the vicinity is the main problem.There is a high degree of willingness to buy or switch to local products when these constraints are addressed. Hence, there is a good opportunity to develop production and marketing of milk in the country. This will further minimise dependency on imported products.

From 1977 to 2022

Prior to the adaption of the open economic policies in 1977, local milk production met around 80 percent of the domestic milk requirement. At present, Sri Lanka is around 40 percent self-sufficient which means 60 percent of milk is still being imported.This has resulted in spending over US $ 400 million per year to import nearly 100,000 metric tons of powdered milk.

Milk powder is considered an essential item in Sri Lanka with price controls imposed by the Government. Milco, Pelawatte, Kotmale Dairies and Nestle Lanka produce milk powder locally. Dairy products are mainly imported from New Zealand and Australia as well as Denmark, the Netherlands and India. Imported milk powder is still cheaper than locally produced milk.

Sri Lanka is one of the few countries that still consumes milk powder, in contrast to countries such as the United States, Europe and even Australia and New Zealand, which rarely sell powdered milk in retail stores. In some instances, the foreigners who visit Sri Lanka are taken by surprise when they see powdered milk.

As a result of the commercial adverts and lack of knowledge of the harmful effects of powdered milk, Sri Lankans tend to prefer powdered milk over fresh milk. Moreover, there is also misconception among consumers in Sri Lanka that fresh milk can cause conditions such as phlegm and asthma.

Dairy sector issues

The main cause of the problem is importation of milk products (particularly milk powder).It is of vital importance that the government re-visits the policy on import duty for milk powder and ensures that importation of milk powder is discouraged. We are currently in a deep financial crisis, it is important that the country now looks at strategies to promote local dairy industry. All in all, fresh milk consumption will improve the health of Sri Lankans and the economy. If this is done correctly, we can directly save over US 400 million dollars per year.

A major problem of the local dairy farmers is the high cost of production which leads to low profit margins. Dairy farmers are faced with challenges such as limited access to financial services, lack of working capital, low liquidity (due to inability to access financial services), low spending on dairy sector by the government. It can be challenging to encourage smallholder farmers to adopt new techniques, with many preferring to stick to traditional methods.

Scarcity of feed during the dry season is a major problem in Sri Lanka. A lactating cow will consume between 18 and 25 kg of dietary dry matter each day, depending on how much milk it produces. The maximum amount of milk available from dairy cows is not reached in our country as the cows cannot be milked properly due to lack of adequate grasslands. This means that to achieve high yield of milk, we must focus on grasslands rather than increasing the number of dairy cows.

Genetic background, climate, diseases, feeding, year, and season of calving have been reported to affect milk production.There were government-initiated programs for the importation of milch cows from Australia, New Zealand and from some European countries. However, it is well documented that these breeds, which have been intensely selected for milk production, can have decreased performance, lower fitness levels and reproduction traits in their non-native environments. A solution to these problems is to develop a locally adapted dairy breed based on a foundation stock of imported temperate dairy cattle.

Substitution for fresh milk

Fresh milk is costlier than powdered milk. The best aspect of the powdered milk is its cost efficacy. Powdered milk comes at half the price of fresh milk. Powdered milk is an inexpensive, versatile and shelf-stable way to supplement dairy intake. However, there are a couple of potential disadvantages of milk powder, including taste and texture that may not be for everyone.

Powdered milk and fresh milk have good nutritional value, but fresh milk is a much better source of certain vital nutrients. However, both milks share significant similarities in their nutritional value.

Fresh milk has a more pleasing taste and flavor compared to powdered milk. However, fresh milk has a shorter shelf life compared to powdered milk. Powdered milk is a perfect option for those who can’t get a regular supply of fresh milk and is convenient to certain people. Most milk powders contain added sugar which automatically increases the calorific value and is also not desirable for people with diabetes.

It can develop bacteria if it is not stored properly. The concept of powdered milk has also become a hit in the global market because of low lactose formula. Thus, for the people who are lactose intolerant, powdered milk is a perfect option.

Oxidised Cholesterol

It is true that in the process of turning fresh milk into a powder, the cholesterol in the milk is likely to get oxidized. For increasing the shelf life of milk, this artificial substance is added to the powdered milk. Commercial milk powders are reported to contain oxysterols (oxidized cholesterol) in higher amounts than in fresh milk (up to 30 μg/g more than in fresh milk). The oxidised cholesterol appears to be the most dangerous among all the cholesterol. It can make your blood vessels irritated. Oxidized cholesterol refers to wax-like substance that sticks to the wall of arteries and harms the blood vessels. Eventually this may lead to heart disease. However, non-fat dried milk is not going to be a significant source of oxidised cholesterol because non-fat milk contains almost no cholesterol to begin with.

Why the Netherlands?

The Netherlands is known worldwide as a dairy country. Almost 30 percent of the land is dedicated to dairy production while 52 percent of agricultural land is grassland. Contributing to around seven percent of the trade balance of the Netherlands, the dairy processing industry is one of the main industries in the country.

Yearly around 14 billion kilograms of milk is processed and turned into milk, butter, cheese, milk, milk powders and other products. The Dutch share in the world dairy trade amounted to almost five percent in 2019, earning the Netherlands a spot among the top five largest dairy exporters with New-Zealand, the US, Belarus, and Germany.

The Dutch dairy sector aims to make the production of milk more sustainable. Greenhouse gas emissions per kilogram of milk produced in the Netherlands are far below the global average.Dutch dairy farming is highly developed; the milk yield per acre of grassland and the yield per cow are among the highest in the world.

The Holstein-Friesian breed is number one in the world in milk production. The breed’s origin is pure Dutch. The Netherlands has the highest percentage of cows being milked by Robots; the milk quality is also extremely high. Also, the Netherlands is the World’s largest milking machine exporter. Dutch dairy giant Friesland Campina is the world’s largest dairy co-operative and one of the top five dairy companies in the world with an annual revenue of 11 billion euros.

The Dutch dairy chain consists of 16,250 companies providing milk, with 1.63 million cows, delivering milk to 53 milk processing factories, employing 49,000 people, and creating products with a value of 12.5 billion euro in 2017 of which 7.6 billion euro by the milk processing industry.

Around 35% of the products remain in the Dutch market, while 45 percent is exported to the European Union and 20 percent to other countries. Sri Lanka has approximately 750,000 cattle and buffalo milk cows. The smallholder dairy farmers dominate the livestock industry with an estimated 300,000 registered farms.

Around 72,400 people depend solely on dairy as their main source of income. In addition, annual Milk Production (Litres) in 2021 in Sri-Lanka: 425,369,628 (Cow milk) 87,935,850 (Buffalo Milk): Total Annual Milk Production (Liters) 513,305,478 and with their yearly production of 14 billion kg of milk the Netherlands has around 27 times bigger yield of milk. The average milk yield per cow per year in the Netherlands is 9,00 kilograms.

Genetic background, climate, diseases, feeding, year, and season of calving have been reported to affect milk production.

During the past few decades dairy cow genetics have evolved significantly, allowing us to breed cows with higher genetic merits, targeting higher milk production and improved feed conversion rates.Modern dairy farming is associated with increasing farm size, more living space per cow, more feeding trough space per cow, more comfortable bedding conditions, easier access to feed and water, better climate control to avoid heat stress, and better management for transition cows. All these improvements have led to more comfort and less stress for cows, especially around calving, resulting in higher milk production and lower disease rates.

The Dutch dairy industry focused on quality and sustainability.Despite the many challenges facing the Dutch dairy industry, the sector remains focused on sustainability, incentivized both by legislation and by industry initiatives.

Quality systems

Within the quality systems, animal health is a top priority. Legislation requires dairy farmers to stay on top of factors such as stable climate and veterinary medicines, but to further promote animal health, the Dutch dairy sector has imposed extra requirements on itself. Animal health, for example, is continuously monitored by the independent Animal Health Service.

In addition to animal health, there are three other pillars on which Dutch dairy system is based including: hygiene, milk production and storage, as well as supervision support quality systems.

Sustainability initiatives

In addition to focusing on animal health and biosecurity, the Dutch dairy sector has a strong focus on sustainability. This is partially driven by initiatives such as ‘Sustainable dairy chain’, which focus on climate-responsible production, animal health and welfare, preservation of outdoor grazing, biodiversity, and the environment.

These developments are also driven by initiatives such as Planet-Proof. Under PlanetProof, dairy farmers must comply with general guidelines on milk quality, on-farm safety, and pasturing (cows must graze for at least 6 hours per day, with a maximum of 10 cows per hectare of pasture), as well as safeguarding biodiversity (by promoting permanent pasture, reducing the use of plant protection products, and using locally-produced animal feed), the climate (through imposing strict requirements on maximum GHG emissions and the mandatory use of green electricity), animal welfare and health (including monitoring of adult cows and youngstock), and full freedom of movement for the cow .

Win with Dutch Dairy Expertise

Dutch city -Leeuwarden is the scientific hotspot of the European dairy industry. Leeuwarden is also host to the Dairy Campus, the innovation center for dairy farming and part of Wageningen University and Research (WUR).

Dutch dairy organisations share their expertise with counterparts in developing countries through peer-to-peer collaboration and promoting public-private partnerships.The connection between the various parties allows knowledge and technology to be shared – and applied locally – very quickly.

Thus, developing a close connection with the Dutch dairy business and organisations would significantly broaden our opportunities. Through participating in projects, conducting short visits and international internships, Sri-Lankan dairy farmers would be able to gain a more hands on experience with the newest scientific inventions and developments in this sector, which would allow them to enhance their career possibilities as well as aid them in further advancing dairy industry in Sri Lanka.

Simultaneously improving the sustainability and economic perspective of the dairy farming sector is no simple matter and should not be approached in a unilateral fashion. It is vital that all relevant stakeholders such as dairy farmers, banks, dairy businesses, regional and national policymakers, work to develop a cohesive package of measures, direction and economic prospects aimed at the long term.

The writer is the Director EMEA at a Dutch Cooperate Finance company