Optimizing Dairy Marketing in Karnataka, India: Analyzing Cost, Efficiency and Price Spread Across Channels

Abstract

The dairy sector is recognized as a crucial element of India’s agriculture, contributing significantly to rural livelihoods and the national economy. This study aimed to investigate the efficiency and cost structures of various milk marketing channels in Karnataka. Data were collected from vendors, farmers, and administrative officials, as well as secondary data from commercial dairy plants, to analyze the input-output relationships and marketing efficiency across different channels. Two major districts, Mandya and Dharwad, were selected, and ten creameries, ten milk vendors, four medium-sized dairy plants, and one large commercial dairy plant were examined. Milk marketing channels were categorized into organized and unorganized systems, and the costs and returns associated with each type of intermediary were assessed. The analysis revealed considerable variations in marketing costs and efficiency. Channels with fewer intermediaries, such as direct sales from producers to consumers (Channel-I), were found to have higher efficiency. Conversely, channels involving multiple intermediaries, like those including creameries and vendors (Channel-IV), exhibited higher price spreads and lower efficiency. For instance, Channel-V demonstrated the highest marketing efficiency of 3.94, while Channel-IV showed the lowest efficiency at 2.03. It was observed that a higher number of intermediaries correlated with a larger price spread and reduced marketing efficiency. The study highlighted the need for improving marketing channels and strengthening linkages between farmers and organized sectors to enhance overall productivity and profitability in the dairy industry.