DDC Looks to China and Pet Food Markets to Boost Dairy Sales in Nepal
Source: DairyNews.today
Nepal’s state-owned Dairy Development Corporation (DDC) is facing a financial crisis, struggling with Rs 580 million in outstanding payments to dairy farmers due to a sharp decline in demand for raw milk and dairy products in recent years.
The DDC, Nepal’s largest dairy company, has been hit hard by what it describes as the worst recession in the dairy industry. Products like packaged raw milk, powdered milk, and ghee have accumulated in its warehouses for over two years, as consumer demand remains low.
The downturn is attributed to shrinking household incomes, which have dampened consumption of dairy products, and concerns about the smuggling of cheaper Indian dairy products into Nepal. Analysts point out that the price difference between milk in Nepal and neighboring India has created a profitable incentive for cross-border smuggling. In Nepal, a liter of milk costs Rs 130, compared to Rs 100 in Uttar Pradesh, India, making milk imports attractive to traders.
In April 2023, the dairy sector unexpectedly called on the government to lift restrictions on the import of milk powder to ease domestic milk shortages caused by the Covid pandemic and lumpy skin disease outbreaks among cattle. After a brief surplus of milk in February 2024, dairies struggled to sell the milk, leading to excess stock of powdered milk and butter. Despite efforts to convert surplus milk into powdered forms, demand for these products remained low, contributing to severe liquidity issues for both public and private dairies.
The crisis prompted a nationwide protest by dairy farmers in February 2024, demanding overdue payments. However, as summer passed with no significant recovery in dairy demand, DDC shifted its focus to alternative markets for its products.
In a strategic move, the DDC has entered into discussions to supply 10,000 liters of milk daily to a private company involved in producing dog chew, a popular pet food product exported to the United States. Surya Prasad Paudel, General Manager of the DDC, expressed optimism about this deal, noting that it could generate critical cash flow for the corporation. Manaram Group, a key player in Nepal’s pet food export sector, plans to buy whey from DDC as part of a pilot project, with the potential to scale up to 10,000 liters daily to meet growing demand for dog chew in international markets.
The demand for dog chew has surged in the US and Canada, driven by increasing pet ownership, particularly during the Covid lockdowns. Nepal’s dog chew exports have risen by 240% over the past six years, with 90% of production heading to export markets. The product is made primarily from yak and cow milk and has become a sought-after commodity for its high protein and nutritional content.
In another effort to diversify revenue streams, DDC is also preparing to export butter to China. Paudel confirmed that documents have been sent to facilitate butter exports to Tibet, with an agreement in place to ship 30 tonnes of butter weekly or monthly, depending on demand.
Meanwhile, DDC’s inventory remains substantial, with 500 tonnes of powdered milk and 600 tonnes of butter currently in stock. To address its financial obligations, the DDC received a Rs 600 million loan from the government, which is expected to clear the dues by mid-July. The corporation has also implemented a quota system to control milk procurement, buying approximately Rs 200 million worth of milk from farmers monthly.
Despite the challenges, DDC is determined to stabilize its finances through these new ventures, including leveraging both domestic and international markets to alleviate its cash flow problems and ensure timely payments to farmers.
The downturn is attributed to shrinking household incomes, which have dampened consumption of dairy products, and concerns about the smuggling of cheaper Indian dairy products into Nepal. Analysts point out that the price difference between milk in Nepal and neighboring India has created a profitable incentive for cross-border smuggling. In Nepal, a liter of milk costs Rs 130, compared to Rs 100 in Uttar Pradesh, India, making milk imports attractive to traders.
In April 2023, the dairy sector unexpectedly called on the government to lift restrictions on the import of milk powder to ease domestic milk shortages caused by the Covid pandemic and lumpy skin disease outbreaks among cattle. After a brief surplus of milk in February 2024, dairies struggled to sell the milk, leading to excess stock of powdered milk and butter. Despite efforts to convert surplus milk into powdered forms, demand for these products remained low, contributing to severe liquidity issues for both public and private dairies.
The crisis prompted a nationwide protest by dairy farmers in February 2024, demanding overdue payments. However, as summer passed with no significant recovery in dairy demand, DDC shifted its focus to alternative markets for its products.
In a strategic move, the DDC has entered into discussions to supply 10,000 liters of milk daily to a private company involved in producing dog chew, a popular pet food product exported to the United States. Surya Prasad Paudel, General Manager of the DDC, expressed optimism about this deal, noting that it could generate critical cash flow for the corporation. Manaram Group, a key player in Nepal’s pet food export sector, plans to buy whey from DDC as part of a pilot project, with the potential to scale up to 10,000 liters daily to meet growing demand for dog chew in international markets.
The demand for dog chew has surged in the US and Canada, driven by increasing pet ownership, particularly during the Covid lockdowns. Nepal’s dog chew exports have risen by 240% over the past six years, with 90% of production heading to export markets. The product is made primarily from yak and cow milk and has become a sought-after commodity for its high protein and nutritional content.
In another effort to diversify revenue streams, DDC is also preparing to export butter to China. Paudel confirmed that documents have been sent to facilitate butter exports to Tibet, with an agreement in place to ship 30 tonnes of butter weekly or monthly, depending on demand.
Meanwhile, DDC’s inventory remains substantial, with 500 tonnes of powdered milk and 600 tonnes of butter currently in stock. To address its financial obligations, the DDC received a Rs 600 million loan from the government, which is expected to clear the dues by mid-July. The corporation has also implemented a quota system to control milk procurement, buying approximately Rs 200 million worth of milk from farmers monthly.
Despite the challenges, DDC is determined to stabilize its finances through these new ventures, including leveraging both domestic and international markets to alleviate its cash flow problems and ensure timely payments to farmers.
