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Cargills launching Sri Lanka's milk revolution

Published on 17 December, 2006, Last updated at 06:07 GMT

By Maheshi Anandasiri
Sri Lanka Sunday Times

Cargills Quality Dairies (Pvt) Ltd (CQDL), is looking beyond the vistas of ice cream to expand into a fully fledged dairy facility in a bid to kick start Sri Lanka's own "Milk Revolution".

CQDL which currently produces the "Magic Ice Cream' range, has set itself the ambitious task of spanning into a utility that churns out as much as 150,000 litres of milk a day. Leading the pack of milk lovers is India's own milk man Dr Jagjit Punjrath, who spearheaded India's white revolution.

Managing Director of Cargills Ranjit Page who hand picked Dr. Punjrath to guide the revival of the abandoned "Walls" plant in 2002 told The Sunday Times FT that his vision in absorbing Dr. Punjrath was to manufacture dairy products that are affordable to the masses. "The Walls assortment was too expensive and once the hype ended breaking even was deemed virtually impossible. When we took over and started Cargills Magic we wanted make products that the masses could afford. We understood the Sri Lankan consumer and wanted to give them something that was Sri Lankan," Page said. Building on this vision CQDL now wants to move beyond ice cream manufacturing and invest in a major dairy development project initially targeting the Gampaha District. Currently over 900 dairy farmers are registered with CQDL, to supply milk for the Cargills Magic factory. Under the company's guidance 400 farmer societies have been formed with each society functioning as a collecting centre. Milk Procurement Manager for CQDL Krishantha Kumarage said that close to 18,000 litres of milk gets collected on a daily basis with the company paying Rs. 25 to 26 for a litre of milk that has the precise amount of fat and solid non fat. The company also assists the farmers with the supply of vermicide, calcium and minerals for the animals while awareness is also provided to ensure that the quality of the milk does not vary. CQDL is also looking to assist farmers by providing cattle feed at a subsidized rate.

But Page noted that with this effective structure already in place, the time is now right to look beyond the production of ice cream. "Definitely we want to move into yoghurt and packed milk because the Cargills goals is to increase the volume of consumption of milk," he said.

Dr Punjrath who has researched into Sri Lanka's dairy industry since 1987, noted that the mindset of the Sri Lankan consumer needs a radical change. "Even Sri Lankans who own dairy cows sell fresh milk and buy powered milk which only serves to safeguard foreign dairy farmers," he said. So Cargills is out to revolutionize the dairy market by infiltrating it with its own fresh milk products.

With the project cost estimated at Rs. 750 million the task CQDL has set itself is ambitious, but not impossible. According to the enthusiastic Dr Punjrath the project will be at full swing within three years with Cargills chipping in with an initial Rs.500 million to cover the cost of a new plant, machinery as well as the marketing campaign. Another Rs. 250 million is required to provide dairy farmers basic infrastructure facilities such as testing equipment, storage mechanisms and transport. The project is eventually expected to absorb 30,000 dairy farmers churning out 150,000 litres of milk a day. With each Sri Lankan estimated to drink 85 millilitres of milk a day, that amount according to Dr. Punjrath is enough to cover the daily milk requirement of close to 160,000 Sri Lankans.

Drawing from the Indian model Page noted that dairy development has been identified as a key instrument of social development. "So we are not willing to sit around and wait for the government to do this. We have taken this task on and we will revolutionize the dairy industry of Sri Lanka," he said.

"We've had an oversupply of chickens. If you look at placement data from the end of November, we've only placed 92 percent as many birds as the previous year," Chamblee said.

He said exports had recovered by year-end, and world consumers have a much higher level of confidence in the industry.

With U.S. and Mississippi poultry exports down, supplies of processed birds are up, and poultry companies are slowing production.

"We're probably going to be down 7 percent on the number of birds produced this year in Mississippi," Chamblee said. "However, we will produce more pounds this year because the average weight of birds has gone up."

The average weight of a broiler grown in Mississippi is 5.73 pounds compared to the 5.58-pound average produced in 2005.

Prices initially dropped with too many broilers on the market. Chamblee said prices returned to last year's levels of about 66 cents a pound by year-end, up from about 58 cents a pound in April and May.

"Even with prices recovering, the industry still faces some financial issues because corn prices are going up as energy sources compete for corn," Chamblee said. "Corn is the major ingredient of poultry feed, and these prices are continuing to increase, as do energy costs."

Laurel-based Sanderson Farms, Inc., the state's largest Mississippi-owned poultry company, announced annual data in early December that showed net sales for 2006 were $1.048 billion compared to $1.053 billion in 2005. Fourth quarter performance helped the company's overall numbers.

"Our fourth quarter performance reflects an improvement in market prices for poultry products over the first half of fiscal 2006," said Joe F. Sanderson Jr., chairman and chief executive officer of Sanderson Farms. "Overall, we are pleased with our results during the quarter."

Sanderson Farms reports that 2006 prices decreased 6.1 percent from 2005, with bulk leg quarter prices down almost 25 percent for the year. Leg quarters are a big export item, and the concerns over avian influenza have made conditions "difficult" in the export market during the first half of the year.

The estimated value of egg production in Mississippi was up 4.3 percent. Chamblee said egg production was slightly higher than in 2005, but demand was down and there was an oversupply of eggs.

At year-end, egg prices remained depressed at about $1 a dozen, but much higher than the 40 cents a dozen price they brought in the summer.


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