Demonetisation and Dairying: A trade that has stalled

With cash-strapped farmers unable to purchase new animals, business in cattle markets has come to a standstill that could also impact milk production.

Written by Partha Sarathi Biswas | Loni (maharashtra) | Published: January 5, 2017 12:49 am
demonetisation, demonetisation effects, demonetisation impacts, farmers, demonetisation farmers, demonetisation trades, farmers business, milk products, cattle market, cattle trade, cattle traders demonetisation, maharashtra, maharashtra demonetisation, LOni, Loni cattle market, demonetisation effect on cattle marketing, cash crunch, farmers cash crunch, , milk production cash crunch, gujarat, vadodara news, india news, indian express  news The cattle market at Loni, Maharashtra. (Source: Express photo by Partha Sarathi Biswas)

For Munnabhai Jaghirdar, October-January is when business is brisk, with farmers flush with cash from sale of their kharif crop and spending this money also on purchase of cows – which is what this trader at the Loni cattle market in Ahmednagar district’s Rahata taluka deals in. For farmers, this is an opportune time to buy because the winter and spring months coincide with milk production from animals, too, peaking. As more milk flows from their udders, the faster is the payback on investment; this is simple economics.

But this time round, things have turned out quite the opposite, with demonetisation. “During this period, I normally do sales of around 20 cows every week. These days, though, I would be lucky to do even two”, remarks Jaghirdar. He’s particularly troubled by the lack of buyers from Gujarat. “About 80 per cent of my customers are farmers from that state. Since notebandi (the outlawing of all existing Rs 500 and Rs 1,000 denomination currency notes after November 8), they have virtually stopped coming”, he adds.

With an annual turnover of about Rs 100 crore, Loni is one of Maharashtra’s biggest cattle market. Subhash Mote assistant secretary of the weekly bazaar that meets every Wednesday, is in agreement with Jaghirdar. “Before demonetisation happened, this market used to trade 2,000-odd animals every week, with more than a quarter being bought by farmers from Gujarat, particularly Sabarkantha, Mehsana, Vadodara, Navsari and Valsad districts. Now, the animal arrivals have themselves fallen to below 1,000, with weekly purchases by Gujarat farmers not more than 40”, he reckons.

The cattle trade is wholly in cash. Kamleshbhai Patel, a farmer from Vaghaldhara village in Gujarat’s Valsad district, has travelled over 200 km to the Loni market. “We had good rains this year. People in my village alone planned to purchase roughly 50 animals. But since nobody had enough cash and the traders here don’t take cheques, we ended up buying only five”, he says.

Vipulbhai Chaudhary from Dena village of Vadodara had to similarly return empty-handed, after his repeated attempts to get traders at Loni to accept cheque payment failed. Manojbhai Patel, whose village of Balwada in Navsari district’s Chikhli taluka is 250 km from Loni, has also been unsuccessful in acquiring new animals, which he always does at this time. “My milk payments have been deposited in my bank account. But given the cash crunch and long queues, I’ve been unable to draw money to pay the cattle traders”, he complains.

“Suppose these bounce, what would we, then, do?”, is the response of Bhikan Dagdu Pathan, a trader at Loni, when asked why he is unwilling to accept cheques. “We have always done this business in cash. Most of us don’t even know the way banks work”, claims Vikhan Bhailam, a fellow trader.

demonetisation, demonetisation effects, demonetisation impacts, farmers, demonetisation farmers, demonetisation trades, farmers business, milk products, cattle market, cattle trade, cattle traders demonetisation, maharashtra, maharashtra demonetisation, LOni, Loni cattle market, demonetisation effect on cattle marketing, cash crunch, farmers cash crunch, , milk production cash crunch, gujarat, vadodara news, india news, indian express  news Farmers and traders at the cattle mandi in Loni. (Source: Express photo by Partha Sarathi Biswas)

There is a vibrant trade linking Loni’s cattle market to dairy farmers of Gujarat, having primarily to do with the strong milk cooperative movement in that state. The remunerative milk prices given by dairies make it worthwhile for Gujarat’s farmers to invest in high-yielding crossbred animals. Since these farmers want practically ready-to-milk animals whose produce can be straightaway sold to unions affiliated to Amul – the Gujarat Cooperative Milk Marketing Federation – it has spawned a complementary business of calf-rearing in states like Maharashtra and Punjab (see separate story). The latter breeder-farmers, in turn, supply mature milch animals to their Gujarat counterparts through traders like Pathan and Bhailam.

“We source animals from farmers in Pune, Ahmednagar, Satara, Sangli and Kolhapur, and bring these to Loni. Thanks to the good road connectivity from Surat, Ahmedabad or Mehsana, the Gujarat farmers come here to buy directly from us. The animals travel back with the farmers in their trucks”, explains Pathan.

That trade has, however, been a casualty of demonetisation. With cash-strapped farmers in no position to make purchases, two-year-old cows capable of giving 20 litres milk daily are currently selling at an average of Rs 65,000, as against Rs 80,000 or so prior to demonetisation.

“Ordinarily, we would have expected prices to go up this time. The good rains and improved fodder availability should have triggered higher animal demand from farmers. Instead, we are seeing lower prices and hardly any purchases”, points out Mote.

The declining investment in new animals by farmers – for reasons unrelated to demand – is ironically happening even with milk shortages developing, following two consecutive drought years. Replenishment of dairy stock by farmers at this time is important, especially to help maintain milk output in the ‘lean’ summer months when production by animals tends to fall in the natural course.

The Kolhapur District Cooperative Milk Producers Union, which markets dairy products under the ‘Gukul’ brand, only on December 31, raised its procurement price for cow milk containing 3.5 per cent fat and 8.5 per cent SNF (solids-not-fat) from Rs 22.80 to Rs 24 per litre. Earlier, on December 27, the Maharashtra government-owned Aarey Dairy revised upwards the purchase price for the same quality of milk at its Worli plant in Mumbai from Rs 21.25 to Rs 22.50 a litre.

“Prices are likely to go up further in the coming weeks, as the effects of lower production catches up”, warns Dashrath Shrirang Mane, chairman of the Pune-based Indapur Dairy and Milk Products Ltd. His company, which is Maharashtra’s biggest private dairy and sells under the ‘Sonai’ brand, is currently processing 10 lakh litres per day of milk. Last year, at the same time, it was handling 22 lakh litres daily.

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