IV.

Company Analysis
A-1. Importance of Fresh Milk to a certain area
 It is important to an individual because:
 It is a source of vitamins and minerals
o Milk is the best source of calcium for our body. Calcium protects our bodies
from bone loss, migraine headaches, and obesity in children and aids in losing
unwanted fats.
o Vitamin D actually helps the body absorb calcium. Vitamin D helps bone
strength by promoting bone growth and reducing the risk of brittle bones. It
also reduces inflammation and increases immune function.
 It contributes to a strong and healthy bones.
 Drinking milk will result in great dental health.
 Fresh milk might help lower your risk of developing cardiovascular disease.
 It helps keep bodies hydrated.
 It is a good alternative to a powdered milk.
 It enable you to consume ready-to-drink and fresh beverage.
A-2. Significance to our economy
It is a well-known fact that the dairy industry actively contributes to the economies of a
number of communities, regions and countries. An increasing demand worldwide is noticeably
emerging at present, and the industry is globalizing, thus increasing the scope and intensity of the
global dairy trade. However, the question of how and on what criteria we can objectively assess
the economic benefits of the dairy sector still remains.
Production
In 2011, milk production was estimated at 748.7 million tons, of which 620.7 million tons
was cow’s milk, produced by 260 million cows. The number of dairy farms greatly depends on
the countries and on the farming systems.
In the last decade, the value of milk as well as that of all agricultural products has shown
an increasing trend. Milk production value, out of total agricultural production, represents
between 8.5 and 10.5% depending on the year.
Employment
The dairy sector can play an important role in providing jobs for rural communities.
Dairy production and processing provide employment, not only to people who work on dairy
farms or in dairy plants, but also to the whole sector, from upstream (inputs and services
providers…) to downstream (marketing of finished products…).
At farm level, it is possible to account for the number of people working on dairy farms
in comparison with the total agricultural labor force, as was done recently for 27 countries. On
average, dairy labor force represented 3% of all agricultural employment, but this figure covers a
wide range of situations.
 Assessing the benefits of dairying in terms of employment is especially relevant in
developing countries. Globally, around 150 million small-scale dairy households, equivalent to
750 million people, are engaged in milk production. To these millions of jobs, employment
linked with transporting, processing and marketing the milk can be added.
B. How these companies are example of pure competition?
Milk is a uniform and homogeneous product. It is not possible to make a distinction
between the milk of one farm and another. The government has indeed set standards of quality,
fat content and cleanliness. A milk producer who would try to raise his/her revenues
by increasing the price for milk, would find the company collecting the milk in that region
unwilling to buy his/her milk any longer. One individual farmer is thus unable to affect the
price of milk in the entire market. Agricultural production can start for most crops by simply
planting on a parcel of land. For instance, that is true for fruit trees and vegetables. (It is true.
however, that for some products such as milk or tobacco, the government limits production
because of the existing overproduction). A single milk producer cannot possibly influence the
consumption of milk at large, and needs not advertise. An association of milk producers or a
large milk distributor may, however, be in a position to use advertisement effectively.
Nationwide, the demand for milk is likely to be down sloping, that is inversely related to price.
But for a single milk producer, it is given by the price the farmer can receive: the going market
price. It does not change, no matter what quantity the farmer produces. Thus demand is
horizontal.