Determination of consumer milk price in the informal dairy market in Bangladesh: A district level analysis of vertical system linkage

The objective of this study was to identify the determinants of consumer milk prices and test the hypothesis that input prices, e.g., rice straw and wheat bran, as well as the farmgate milk price exert an influence on the consumer milk price. A unique panel dataset from July 2018 to June 2021 was obtained from the Integrated Dairy Research Network (IDRN) Bangladesh Monthly Dairy Sector database and was analysed using the Generalized Methods of Moments (GMM) methodology. The data collection and validation were done with a national panel of experts jointly with the data collection and processing team. The study found: a) vertical linkage with input and output price is highly affecting the consumers milk price which was due to the substantial variation across the regions and time; b) The dynamic panel analysis of GMM revealed mixed relationship between input prices (rice straw and wheat bran), farm gate milk prices, and the consumer milk price; c) The farmgate milk price determines the increase in consumer milk prices, and it is possible to predict the consumer milk price based on the time-price-system interaction variability of the farmgate milk price; d) Using COVID-19 as a proxy for real time impact, the study found a stark impact of COVID-19 on the input price and output prices and triggering a decrease in consumer milk prices by 3.96 BDT kg-1 milk (0.05 USD kg-1). The findings of this study are expected to be beneficial to the decisions making process of dairy farmers, milk processors, feed industry, consumers, and policy makers.