Determinants of farmers’ loyalty to dairy processors in Minas Gerais, Brazil

Andre Rozemberg Peixoto Simões,Charles Frederick Nicholson,Roberto Max Protil,Dalton Mendes De Oliveira,Janderson Damaceno Dos Reis,André Luiz Julien Ferraz

doi:10.1590/0103-8478cr20200340

Andre Rozemberg Peixoto Simões, Charles Frederick Nicholson + Show 4 more

Open Access

https://doi.org/10.1590/0103-8478cr20200340

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Abstract

ABSTRACT: The current study explores variables associated with the loyalty of dairy farmers to dairy processors in the Brazilian context. A multivariate discrete choice (Logit) model and alternative formulations assess the associations between loyalty metrics and farm and processor characteristics for a sample of 32 dairy farmers in 16 municipalities at the Zona da Mata in Minas Gerais. Twenty-two dairy processors were identified as milk buyers in the area studied, but each farmer indicated that they could sell to an average of five alternative buyers of milk. Farmers’ attributes such as production scale or the technological level are not statistically significantly associated with loyalty in this sample. The current milk price paid to farmers in our sample is not associated with increased loyalty (sales to a single processor for 6 or more years) in all estimated models; although, further research on this impact is merited to inform buyer-pricing policy. Variables associated with increased loyalty include payment of premiums for quality, farmer years of experience and cooperation among farmers in the purchase of inputs. Delayed payment is associated with reduced loyalty. We could not determine the effect of participation in technical assistance programs offered by processors on loyalty, because in our sample all farmers received free university-provided technical assistance. The payment of a premium based on milk volume was also unassociated with loyalty determination. The small size of our sample limits the ability to generalize our results but provides exploratory results that facilitate future investigation.

Highlights

Brazil had around 1.2 million dairy farmers in 2017 (IBGE, 2017), with significant heterogeneity in technology and production scale (SILVA et al, 2016; SIMÕES; REIS; AVELAR, 2017; TELLES; BACCHI; SHIMIZU, 2017)
Given the practical importance of loyalty determinants and the limited knowledge base, the current study explores variables associated with the loyalty of dairy farmers to the dairy processors, focusing on farmer and processor attributes in a small rural community in Minas Gerais-Brazil
Twenty-two dairy processors were identified as milk buyers in the area studied; each dairy farmer indicated that they could sell to an average of five alternative buyers of milk

Summary

Introduction

Brazil had around 1.2 million dairy farmers in 2017 (IBGE, 2017), with significant heterogeneity in technology and production scale (SILVA et al, 2016; SIMÕES; REIS; AVELAR, 2017; TELLES; BACCHI; SHIMIZU, 2017) These farmers sell milk to cooperatives, international companies and small local plants, and the competitive landscape for milk procurement has changed markedly in the past two decades. V.51, n.5, products such as UHT milk over long distances), companies compete more vigorously for the raw milk needed to supply their processing plants (BREITENBACH & SOUZA, 2015; SCALCO & BRAGA, 2014) In this more competitive context, dairy processors desire to retain an optimum number of milk suppliers (farmers) and with characteristics that minimize their logistics costs. The degree of switching by farmers has important implications for both farmers and processing companies, affecting costs, returns and adequacy of milk supplies

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