Pricing of raw milk based on main dairy products in the Iran market

Document Type : Research Paper


1 Former M.Sc. Student, Department of Animal Science, Collge of Agriculture, Isfahan University of ‎Technology, Isfahan, Iran

2 Associate Professor, Department of Animal Science, Collge of Agriculture, Isfahan University of ‎Technology, Isfahan, Iran

3 Ph.D. in Industrial Engineering, Sourcing and Purchasing Director, Solico Kalleh Company, Tehran, Iran

4 Department of Animal Science, Faculty of Agriculture, Isfahan University of Technology, Isfahan-Iran


A multiple-component pricing (MCP) method for the purchase of milk by dairy processors in Iran was developed and compared with the current procedure, reference on percentage differential pricing (PDP) method. Data on the quantity and quality of raw milk and dairy products, and economic data relating to the sale prices of dairy products and processing costs for the Iran dairy market in 2017 were used. Cheese, cream, skim milk powder and liquid milk were the reference dairy products. After calculation of net return for each reference product, and consideration of composition and total production share, economic importance for milk fat and protein were estimated using weighted least square method. Economic values for each percent of milk fat and protein were estimated as IRR 2,741 and 1,311 respectively, with a total value of 12,704 IRR for 1 kg of basal milk (3.2% fat, 3.0% protein); this was slightly higher than the current PDP of 12,500 IRR. The effect of including milk composition (quality factors) in the MCP created a differential between milk of the highest and lowest quality that was more than twice that of using the PDP. This illustrates the importance of encouraging the adoption of MCP for dairy processors and farmers in Iran to take into account the pricing structure of the end-products. A more realistic pricing structure for milk based on the protein and fat content would encourage comparison of the value of different products (e.g. milk products vs. meat) for Iranian consumers. 


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