Smallholder Dairy Farmer Access to Alternative Milk Market Channels in Gujarat, India

Although India is already the worlds largest milk producer, dairy production particularly among smallholder and even landless farmers continues to grow with growing demand. Currently over 80% of that milk marketed passes through traditional channels handling raw milk and traditionally processed products, in spite of the high profile given to cooperative dairy development through the Operation Flood programs. However, the growing middle class is likely to increase the demand for the more formal processed and pasteurized products, which the traditional market generally cannot deliver. This may shift opportunities for market participation and development away from smallholder dairy producers towards larger farmers who can deliver larger daily quantities of milk, and may be better able to manage milk quality. This study addresses the links between smallholder dairy farmers and alternative traditional, private and cooperative sector milk markets, using data collected in the traditional Indian dairy heartland, the State of Gujarat, based on a random survey of over 700 rural geo - referenced households. The analyses combine household survey and GIS -derived data that allow a rigorous differentiation of the effects of individual household characteristics from those related to location. A two-step analysis is conducted to explain milk market participation and conditioned on that, milk outlet choice, and their determinants, including a simple probit, followed by McFaddens choice model, using a conditional logit. The results suggest that smallholders are not limited by scale, access to land resources, or social group, from participating in the growing formal milk market channels.