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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