Problems faced by small scale farmers in the dairy sector Pakistan : a case study of Punjab province

Abstract: The contribution of livestock in economic development of a country is vital. Pakistan is blessed with abundant natural resources, especially vast agricultural resources on account of its fertile irrigated land, four seasons and glorious history of old traditions of farming. The iron of the fact is livestock contributes almost 11 percent to GDP and 50 percent to the value addition in agriculture in Pakistan. Pakistan is ranked as the 4th world’s largest milk producer, where formal channels of marketing processed only 3 to 4 percent of milk, while the rest stretched to the consumers through unhygienic control and complex distribution system of middlemen. The study is designed to analyze the consequences of participation in informal and formal supply chains for small-scale dairy farmers in Pakistan. The study aimed at explaining the costs of the chosen formal versus informal supply channels and their transaction costs, role of the mid-agent opportunistic behaviour in the relative milk supply chain. The research is based on qualitative approach which includes: interviews and case studies with the aim to understand social aspects and seeks to find answers regarding various questions as how people behave. It is more about their behaviour and attitudes and how they are affected by different events that goes on their surroundings. Theoretical framework of present study consists of general understanding about the various issues related to small scale farmers with particular focus on transaction cost and agency theory. Different studies were reviewed for the deeper understanding of socio economic condition of the small farmer’s and its characteristics. The study shows a lack of coordination among small scale farmers, and associated high transaction costs. The case studies suggest that small scale farmers are illiterate and not properly trained. The way they handle and produce milk shows the dominance of informal mid-chain agents, where producers face high uncertainty caused by the opportunistic behaviour of middlemen.