Thailand moves to overhaul dairy system over 68m-carton stockpile
A July 27 reform plan will target raw-milk prices and quotas after the state-run DPO accumulated more than 68 million cartons of unsold milk.
The Agriculture and Cooperatives Ministry is preparing a structural overhaul of the dairy industry after the state-run Dairy Farming Promotion Organization of Thailand accumulated more than 68 million cartons of unsold milk.
The stockpile, equivalent to about 1.9 million cases, includes commercial products and milk produced for government programmes. It has strained the DPO’s liquidity and added to its accumulated losses.
A special task force is due to present its reform plan on July 27, with changes to raw-milk prices and quotas expected to form the core of efforts to stop the organisation from taking in more milk than it can process and sell.
The overhaul comes as the dairy industry also prepares for wider trade liberalisation under Thailand’s agreements with Australia and New Zealand.
Raw-milk prices and quotas at centre of reform
Deputy Agriculture and Cooperatives Minister Watcharaphon Khaokham said the task force was finalising measures to clear excess raw milk and reduce the DPO’s boxed-milk inventory.
The proposed restructuring would rebalance raw-milk prices and allocations among private processors, dairy cooperatives and the DPO to reflect current market conditions.
The organisation has long served as a major buyer of milk from Thai farmers. However, it has taken in surplus raw milk beyond its processing capacity and ability to distribute finished products through commercial channels.
“We must acknowledge that purchasing more raw milk than can be sold is the root cause of the accumulated losses,” Watcharaphon said.
“Restructuring the quota and pricing systems will create fairness for private companies, cooperatives and the DPO, and help end the cycle of milk surpluses in the long term.”
School milk expansion could absorb 90 tonnes a day
The ministry is also preparing to use the school milk programme to reduce the immediate surplus.
A proposal awaiting Cabinet consideration would extend the programme from primary-school pupils to students through Mathayom 3.
The expansion could absorb up to 90 tonnes of raw milk a day, according to the ministry. Officials also cited improved nutrition among lower-secondary pupils as a further benefit.
The ministry plans to ask the Dairy Farming and Dairy Products Board, or Milk Board, to increase the DPO’s allocation under the school milk programme from its current 10% share.
A larger allocation would provide another outlet for milk purchased from farmers and generate cash flow for the organisation.
The Social Development and Human Security Ministry and the Education Ministry have also agreed to support the clearance effort by purchasing DPO products for distribution to groups under their supervision.
The task force is separately discussing partnerships with private companies to distribute milk through retail outlets and open additional markets in Thailand and overseas.
Milk extracts and pet products offer new outlets
The ministry sees higher-value products as a longer-term alternative to relying on Thailand’s highly competitive ready-to-drink milk market.
One project involves extracting nutrients and high-quality proteins from raw milk for use in cosmetics, skincare products and cosmeceuticals. The first products using milk-derived extracts are expected to emerge in August.
The DPO is also working with Kasetsart University to research and produce lactose-free milk for pets, including dogs and cats.
Removing lactose would make the products easier for animals to digest. The project is aimed at the fast-growing pet-care market and could absorb part of the raw-milk surplus while generating higher-margin revenue for the DPO.
Milk Land café model faces review
The task force is also examining Milk Land, the DPO’s café and beverage business under the Thai-Denmark brand.
The chain was created as a direct sales channel for dairy products, but officials are awaiting a detailed review of its operating structure and preliminary financial performance.
The findings will be used to assess Milk Land’s strengths and limitations in the modern café market and determine whether its management and branch-expansion plans remain financially viable.
The DPO also wants the cafés to build recognition of the Thai-Denmark brand among younger consumers.
The task force is expected to present the full reform package on July 27, including proposals to clear the existing stockpile and prevent raw-milk purchasing from again exceeding processing and market demand.
