Long-distance transportation and hygienic quality improvement of raw milk

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1 The International Forum on Agri-Food Logistics and II nd Domestic Scientific Conference AGROLOGISTYKA 2014 Poznań, Poland, September 9th -13th, 2014 Long-distance transportation and hygienic quality improvement of raw milk Yasushi Sembokuya and Yoichi Kawano Division of Agricultural Economics, Obihiro University of Agriculture and Veterinary Medicine, Inada Obihiro, Hokkaido , JAPAN

2 Obihiro University of Agriculture and Veterinary Medicine Obihiro University of Agriculture and Veterinary Medicine Hokkaido under graduate; 1,200 after graduate; 120 academic staff; 150 OIE Collaborating Centre

3 Dairy farmers Transportation Milk plant (Pasteurization) Transportation Retailers consumers Physical distribution in milk supply chain and bacterial count dynamics Raw milk Pasteurized milk and milk products Physical distribution 4 million cells/ml (official standard) Bacterial Count Pasteurization

4 dairy farmer milk plant raw milk, pasteurization, transportation, shelf life, bacteria packaged in a producing area raw milk packaged in a consuming area milking (bacteria) retail store end of shelf life pasteurized (drinking) milk 2 weeks pasteurization display in a store waste

5 Longest transportation route for raw milk from Hokkaido Surface transportation Sea transportation More than 2,000 km in less than 72 hours

6 Objectives Hokkaido 1) Introduction of a payment scheme for raw milk based on the hygienic quality of milk, and 2) its economic impact on the milk supply chain. 3) Examining the mechanism of improving hygienic quality of raw milk and 4) how the scheme will promote sustained improvement in raw milk quality.

7 Commercial transaction of raw milk Assigned organizations (e.g. Hokuren in Hokkaido) Milk companies Dairy farmers Raw milk consignment sale Negotiation Yotsuba Farm gate price based on milk quality pooled milk price National Government Payment based on intended use Subsidize milk for milk products use, but not milk intended for drinking. Meiji Morinaga Yukijirushi

8 assigned organization of dairy farmers milk companies milk companies assigned organization in each prefecture agricultural cooperatives 1966 agricultural cooperatives dairy farmers dairy farmers

9 Raw milk price based on intended use and pooled milk price Different raw milk prices for different uses Paid by milk companies based on intended use (drinking, condensed milk, milk powder, whole milk powder, etc.) Pooled milk price Pooled milk price = Total payment from milk companies for different use Total amount of milk from farmers

10 Outline of the Hokuren milk price scheme based on the milk quality Voluntary scheme introduced at 1994 Evaluation items: viable bacterial count(vbc) and somatic cell count (SCC) in raw milk Modified several times Changed period for assigned price from one month to 10days Reduce the number of evaluation classes Change in the criteria of evaluation severer Voluntary criteria are severer than official (Individual percentage of FAT and SNF of farmers milk are adjusted)

11 improvement of milk quality 100 % change in percentage of raw milk with viable bacterial counts below 10,000/ml 70 source)hokuren (federation of Agricultural cooperation's, Hokkaido)

12 April May June July August September October November December January February March Percentage (%) seasonal change of milk quality Seasonal changes in percentage raw milk produced in Hokkaido with viable bacterial counts below 10,000/ml in 1996 and 1998

13 Current voluntary classification criteria Class Notes Parameters VBC Count < > 150 Thousands/ml price fixed days Premium/Penalty JPY/kg SCC Count < 304 < 304 > 305 Thousands/ml Condition 3 1 or 2 3 continual, 10 days price fixed days Premium/Penalty JPY/kg Source: Hokuren SCC condition of 1st class milk 10-day X 3 price for next 10 days 10-day 10-day 10-day 10-day

14 Number of farmers What is the farm gate price for each class? If the criteria are too stringent for dairy farmers to achieve, then few farmers will receive a premium. e. g. 100 farmers, pooled milk price = 70 JPY/kg 10,000 kg/farmer/year 50 average farmers, ±0 JPY/kg 5 premium farmers, achieve premium +2 JPY/kg 45 farmers, penalized -3 JPY/kg Low VBC good quality 14, ,000 High VBC poor quality What is the farm gate price for each farmer?

15 Outline of payment allocation First-class milk: 5 premium farmers (a + 2) JPY/kg Second-class milk: 50 average farmers (a) JPY/kg Third-class milk: 45 penalized farmers (a - 3) JPY/kg pooled price is 70 JPY/kg Price of average farmers = (a) JPY/kg Total payment from Hokuren = total payment to farmers

16 Results of payment allocation (a+2) JPY/kg x 5 farmers x 10,000 kg +(a) JPY/kg x 50 farmers x 10,000 kg +(a-3) JPY/kg x 45 farmers x 10,000 kg =70 JPY/kg x 100 farmers x 10,000 kg a = JPY/kg Therefore, Premium farmers: JPY/kg Average farmers: JPY/kg Penalized farmers: JPY/kg Motivation for improvement

17 Number of farmers Raw milk price after improvement Due to production improvements, the criteria became easy for farmers to achieve and many farmers will receive the premium e. g. 100 farmers, Pooled milk price = 70 JPY/kg 10,000 kg/farmer/year 45 premium farmers, (premium: +2 JPY/kg) 50 average farmers, (±0 JPY/kg) 5 penalized farmers, (penalty: -3 JPY/kg) Low VBC Good quality 14, ,000 High VBC Poor quality What is the milk price for each farmer?

18 Raw milk price after improvement First-class milk: 45 premium farmers (a + 2) JPY/kg Second-class milk: 50 average farmers (a) JPY/kg Third-class milk: 5 penalized farmers (a - 3) JPY/kg pooled price is 70 JPY/kg Payment to average farmers = (a) JPY/kg Total payment from Hokuren = total payment to farmers

19 Results of the allocation (a+2) JPY/kg x 45 farmers x 10,000 kg +(a) JPY/kg x 50 farmers x 10,000 kg +(a-3) JPY/kg x 5 farmers x 10,000 kg =70 JPY/kg x 100 farmers x 10,000 kg a = JPY/kg Therefore, Premium farmers: JPY/kg Average farmers: JPY/kg Penalized farmers: JPY/kg Claim to modify the criteria stricter

20 Improvement in raw milk quality and changes in classification criteria Stringent criteria: large premium small penalty, motivation for improvement Dairy farmers claim to change criteria more severe Farmers implement improvements After improvement: small premium large penalty

21 Pricing schemes and conflict Hokuren system Average = a JPY/kg Premium = a + α JPY/kg Penalty = a - β JPY/kg Total payment from Hokuren is constant; no conflict between Hokuren and farmers regarding profit sharing alternative system Average = 70 JPY/kg Premium = 70 + α JPY/kg Penalty = 70 - β JPY/kg Total payment is variable and depends on the number of farmers in each class; conflict between organization and farmers about profit sharing

22 Conclusions Farmers who implement effective countermeasures against cow diseases, and who keep their barns and milking sheds clean, receive a higher price for their raw milk. The quality of raw milk in Hokkaido has improved year-on-year; at present, the quality of raw milk produced in Hokkaido is the highest in Japan. The high quality of the milk has facilitated long haul transportation, and has extended the milk supply chain.

23 Thank you for your attention.