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INTRODUCTION
Despite, Kerala's milk production has an
increasing nature; there was a huge gap between its
productivity and demand for milk and milk products.
The major demand for milk in the State is met by
import from neighboring states and reconstituted
milk. Hence, the milk price is mainly controlled by
organized sectors which hold only 16 percent of the
total milk produce and administrative authorities and
secondary market holders, where the price is often
based on the indices such as fat and SNF. The dairy
farmers, who are having a very marginal profitability,
do not have control over the milk price fluctuations.
Also the laborers are moving towards more
remunerative fields than the agricultural sector and
the social status of the youth who are expecting white
collar jobs do not want to take up any type of animal
husbandry activity. This made the shortage of labour
in the state so that the interested poor farmer who was
living with the income moved away from this sector
due to increased cost of production and less profit. In
Kerala, the main problem for the farmer is concerned
every time the farmers' price is hiked; the consumer
price has gone up, because the government does not
offer subsidy while nearby states Karnataka and
Tamil Nadu gives a subsidy of Rs 2 and Rs 2.50
respectively per litre of milk.
The other main problem behind the low
interest in dairy farmers is the decreased cultivation
of paddy also increased the need for cattle feeds.
Almost 90 per cent of the raw materials needed for
the compounded cattle feed are coming from nearby
state. Hence there need to have a sustenance
mechanism where in the milk price should be
determined by the in farm factors which affects its
production such as rate of feed ingredients, labour
charge etc. Statistics on diverse facets of milk
production are required both to focus on the
problems confronting farming as well as farmers in
Kerala in the context of emerging challenges in the
economy, and to throw light on priority areas in need
of policy intervention. One cannot spell out exactly
where forecasts are more frequently needed as the
forecasting techniques have become essential
features in all the ministries, establishments, public
and private sectors. As the food security corner of
Kerala is concerned, such a forecasting will cradle
the government to tide over grim situations with
ease.
ABSTRACT
The main objectives of this study included assessment of trend and growth rates of milk
production, milk price and feed price, correlation between the variables and testing the linear regression
equations with the highly correlated variables for prediction purposes. Yearly secondary data on milk
production, wage of labourer, human population, cattle population, milk price and feed price collected
from various economic reviews of Government of Kerala for the period from 1991-92 to 2009-10 were
used for the analysis.
1. Academic Consultant, Dept. of Statistics, Kerala Veterinary and Animal Science University
2. Former Vice Chancellor, Kerala Veterinary and Animal Science University
STATISTICAL TOOLS FOR THE PRICING ISSUES
IN MILK PRODUCTION IN KERALA
1 2Unnikrishnan T. and Ashok B.
Kerala Veterinary and Animal Science University
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METHODOLOGY
Annual data on milk production, milk price,
cattle population, feed price and human population
are collected from the economic reviews of planning
board of Kerala. The Directorate of Economics and
Statistics changed the Triennium Ending 1981-82
base year to T.E. 1993-94 as a way of updating the
base to a recent year and keep it in harmony with the
other series of indices such as Index of industrial
production, whole sale price index and the series of
national accounts statistics. Hence all the index
numbers were calculated with 1993-94 as base year.thLet Pi - the price in the i year and P that in 0
base year 1993-94 in Kerala. Then the index is
calculated using the formula I = P /P *100. i i 0
Analysis of average annual growth rates,
correlation study and regression analysis were also
done to explore the relationship among the variables.
RESULTS AND DISCUSSION
From Fig 1. it could be seen that both the milk
production and the milk price shows an increasing
trend. In the case of agriculture, remunerative and
steady price for any agricultural produce plays a
crucial role in increasing production of that
commodity. Wide price fluctuations, on the other
hand, discourage farmers from taking up large-scale
investment to improve productivity. The study of
price behavior assumes importance in this context.
The significant and positive correlation between
milk price and milk production shows this. This
correlation tend to the regression equation,
Milk Production (in Lakh Tonnes) = 0.548*Milk
Price in Rs/Ltr +14.0042
Which yields an R of 0.627 indicating 62.7
Percent of the variation in the milk production in
Kerala can be explained by the variation in milk price
alone.
Milk Production and Price per Litre
0
5
10
15
20
25
30
199
0
199
1
1992
199
3
1994
199
5
1996
1997
1998
1999
2000
2001
2002
200
3
2004
200
5
200
6
200
7
200
8
2009
201
0
Year
Valu
es
Production (Lakh MT) Price (Rs/Ltr)
Fig 1. Milk production and Price per litre in Kerala
(b)ANOVA
Model Sum of Squares df Mean Square F Sig.aRegression 110.561 1 110.561 31.931 .000
Residual 65.787 19 3.462
Total 176.348 20
Table 1. Anova Table for regression between milk production and milk price
Table 2. Table of regression coefficients milk production and milk price
UnstandardizedCoefficients
StandardizedCoefficients
B
14.004
.548
Std. Error
1.281
.097
Beta
.792
t
10.928
5.651
Sig.
.000
.000
(Constant)
Milk Price (Rs/Ltr)
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The demand for milk does not increase the
milk price very much as other substituting products
like milk powder are available in the market. But the
increasing milk price is a factor for increasing in milk
production along with other parameters with a
weightage of 0.548 to milk price.
From the significant correlation between
milk price and feed price, the following linear
relationship could be observed by the model,
Milk Price = 1.702*Price of Feed per Kg
+1.641.
The model explains 96.9% of the variation
in the milk price with price of feed as explanatory
variable. Thus when there is an annual increase of
one rupee in one kg of feed, there will be a
corresponding increase of rupees 1.70 per one litre of
milk.
Table 3. Anova Table for regression between milk price and feed price
Regression
Residual
Total
Sum of Squares
356.897
11.398
368.296
Degree of Freedom
1
19
20
Mean Square
356.897
.600
F Value
594.928
Sig.
a.000
Table 4. Table of regression coefficients between milk price and feed price
(Constant)
Feed Price (Rs/Kg)
Unstandardized Coefficients
B
1.641
1.702
Std. Error
.478
.070
Betat
3.436
24.391
Sig.
.003
.000
StandardizedCoefficients
.984
The other factors such as labour cost, production, demand, price of procurements like milk powder etc.
do not come under the model. So there need to have a more scientific way of fixation of price so that both
consumer and farmer are protected by considering all the factors affecting milk price. In this context, a future
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Fig 3. Growth rates of milk production milk price and feed price
Average annual growth rates
-20.00
-10.00
0.00
10.00
20.00
30.00
40.00
50.00
19
91
-92
19
92
-93
19
93
-94
19
94
-95
19
95
-96
19
96
-97
19
97
-98
19
98
-99
19
99
-00
20
00
-01
20
01
-02
20
02
-03
20
03
-04
20
04
-05
20
05
-06
20
06
-07
20
07
-08
20
08
-09
20
09
-10
Gro
wth
rate
Year
Growth Rate (%) Annual_Milk Production
Growth rate (% )Annual_Milk Price
Growth rate (%) Annual_ Cattle Feed Price
study by considering all the variables affecting milk production will help in Government policies and subsidy
programme later.
Analising the growth rates it could be observed that there occurred a sharp increase in feed price during
1992-93, 1997-98 and during 2009-10. Due to this the growth rate in milk production declined well in 2009-10
due to unavailability of sufficient straw due to less paddy cultivation and less grass production as summer was
highly hot during that period. In this circumstances the annual growth rate of milk price was also didn't increased.
These things make the farmer to move away from this sector.
Also during the last few years the wage of labourer is increasing exponentially. The highly significant
correlation between milk price and wage of paddy field labourer gives the linear regression,
Milk Price (in Rs/Ltr) = 0.05* Wage of Men Labourer + 5.613.
Since the model explains 95.2 percent variation in milk price with wage of men as explanatory variable, the
wage of labourer is a main factor in determining the milk price.
Table 5. Anova Table for regression between wage of labour and milk price
Table 6. Table of regression coefficients between wage of labour and milk price
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A few years back the old families could maintain more than one animals. But when they split into nuclear
families the farmer couldn't control more and they have to pay for labourers for additional work. In this context
the increased wage plays a major role in the decreasing cattle population.
From Table (7) with base year as 1993-94, it could be observed that the feed price was increased 310.11
percent and wage 645.04 percent where as the milk price to 274.36 percent
Table 7. Index numbers of milk price, feed price, milk production and wage
Table 8. The Correlation between the variables
Table (8) shows the correlation between different variables influencing milk production. The high
correlation between indigenous population and the total cattles and negative correlation between milk production
and total cattles in Table (8) reveals the paradox between decreasing cattle population and increasing milk
production. This is due to the selling of low yielding indigenous cows and increased productivity with crossbred.
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The high correlation between milk price and human population shows the increase in price with demand.
There is significant correlation with the crossbred animals in milk and the milk production where as there is no
significant correlation between milk production and indigenous animals in milk. It is also to be noted that the
Milk price is directly correlated with feed price.
Fig 4. Non increasing behavior of animals in milk during the last decade
Fig 5. A small increasing behavior in milk production during the last few years
From fig 4 and 5 it could be observed that even though the animals in milk are almost steady, the milk
production is moving upwards. This shows both the higher productivity of crossbred cows and the power of
increasing trend of the use of frozen semen for the last few years. If it could be noted to increase the number of
animals also, this will bring a good increase in milk production in Kerala.
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CONCLUSION
Here an attempt is made to show the
relationship between various factors that affecting
directly and indirectly in determining the milk price
for the last few years and also to estimate a regression
equation by considering various other factors that
influence the price of milk. The need for a more
scientific way for fixation of price so that both
consumer and farmer are protected by considering all
the factors affecting milk price is explained.
REFERENCE
[Anonymous].1999. Brochure on new series on
national accounts statistics (base year 1993-
94). Central Statistical Organization.
[Anonymous].2008. Eleventh Five Year Plan
(20072012). Planning Commission,
Government of India
Box, G.E.P. and Jenkins,G.M. 1970., Time Series
Analysis: Forecasting and Control,
SanFrancisco: Holden-Day.thGujarati,D.N. 2009. Basic econometrics, 5 ed.,
Boston, McGrawHill, 922p.
Mandal,B.N.2004. Forecasting Sugarcane
Production In India With ARIMA Model
(online), New Delhi [19-02-09].
Unnikrishnan,T. and Ajitha,T.K. 2010. Application
of ARIMA models and Co-integration
Techniques in Kerala Agriculture,
Proceedings of the International Seminar on
Applied Statistics, Maharajas College,
Ernakulam.
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