Food safety and market choice of dairy producers in Bangladesh

Dairy production is an important income generating activity for smallholders in Bangladesh. However, milk production in Bangladesh is known to be of poor average quality and high losses due to limited and heterogeneous milk hygiene and food safety practices on farms and during milk collection. Dairy farmers in three agro-ecological zones of Bangladesh were surveyed in order to analyze their choice of dairy markets in relation to their food safety practices. After controlling for farm and household characteristics, physical infrastructure, type of delivery relationships and nominal milk prices received, we find that a particular group of farmers tends to maintain relatively high levels of food safety practices while receiving above average milk prices. Surprisingly, these farmers tend to choose local or traditional markets due to the absence of formal incentives for high food safety practices in cooperatives or among private dairy processors. Instead, informal institutions likely enable dairy farmers with above average food safety standards to negotiate higher prices in the local village surroundings. Regarding the transformation of Bangladesh’s dairy sector towards more productivity, this finding highlights the importance to implement formal testing procedures and establish price related incentives that will reward above average food safety and milk hygiene.