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The red bucket March 31st, 2019 by

I recently had a chance to visit some dairy farmers near Cochabamba. They live in a small community and are members of a dairy cooperative which was able to buy a refrigerated milk storage tank with support from the Bolivian government. Twice a day the farmers bring their metal milk cans to the collection center, a small brick building which houses a 1,000 liter storage tank.

The stainless-steel tank has an electric cooler to chill the milk and a paddle that gently stirs it. This keeps the milk fresh until a tank truck from the dairy collects the milk later in the day. After each milking, the farmer simply takes her milk to the center, avoiding the work of selling it door-to-door, or of making it into cheese.

The farmers are organized in groups of a dozen or so households, and they take turns running the collection center. This involves measuring the density of each delivery of milk with a little gadget that looks like a pistol (a density meter) to make sure that no water has been added, and jotting down how many liters each person brings in.

Every two weeks the co-op pays each farmer for their milk produced. It sounds simple but the reality is different, particularly in calculating the volume of milk each farmer delivers.

The farmers bring in one or two milk cans each time they come. The factory that makes the milk can labels each one “40 liters” but they only physically hold 39 liters. The staff at the co-op are not sure why this is. The farmers at the collection center have been known to naively give a neighbor credit for 40 liters, because the can looked full. Besides, the cans are not always full, so the milk from each family has to be measured accurately, in a special pail. Pouring the milk into the pail (while trying not to spill any) is a tedious task, and another transaction cost. But it has to be done well. The dairy and the cooperative will fine the farmers if they report more milk than they deliver.

Another problem is that farmers report whole liters to the dairy, often rounding down actual volumes.

At the meeting I attended, one young farmer complained bitterly about this. “Sometimes I bring in almost five liters, and they write down four!”

She went on to say that sometimes the person in charge is nice, and gives her credit for five liters, but most of her fellow farmers won’t do that. She singled out one other farmer, doña Irma, as being especially strict.

But doña Irma had a solution for that. “That’s why we have the red bucket,” she politely reminded the group. If someone has a little extra milk, they pour it into the red bucket. If someone needs milk to make up a liter, then can take it from the red bucket.”

Transaction costs can be higher for smaller producers. It may take as much time and effort to deliver 40 liters as to bring in 400. The collection center makes it easier to deliver milk, but it introduces a few new costs, such as the time it takes to run the center, and the risks of mis-measuring the milk.

The young farmer was still angry. No doubt some producers are more motivated to take milk from the red bucket than to add milk. Still, the red bucket was a local if imperfect solution to a nagging transaction cost.

Smallholders will make marketing and institutional innovations, like the red bucket, to stay profitable in a world where food systems are getting every more complex. At a time when many people are leaving the countryside, and multinational corporations are monopolizing the food supply, it’s good to know that at least some cooperatives are trying to work with smallholders so they can earn a decent living in their home communities.

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