The impact of “Dicyandiamide” on the consumer usage of Milk Powder

Research Report Group
National Institute of Business Management Page 1
Abstract
Recent the purpose of this research is to study the impact of “Dicyandiamide” on the
consumer usage of Milk powder. So these operations have resulted in milk powder
consumption in SriLanka after Dicyandiamide issue and consumer behavior, complaints,
ideas, of people they have been evacuated for comprehensive care related to both physical
and psychological. We can identify and said by the health department this issue has been
identified as serious health problem of SriLankan people. We give effort to develop more
effective treatments and ideas for this problem.
So this projects that are conducted in the country “municipal council area of Galle” has
been selected as to carry out the research. We distributed questionnaires for 50 consumers
and we get ideas, complaints, and what they thinking about Dicyandiamide problem. At
the result of DCD issue the important milk powder consumption had decreased by large
percentage in consumers and they shifted to local alternatives, like they use local milk
powder and fresh milk.
As recommendations we could suggests followings,
 The country has to promote consumption of local fresh milk.
 Local Milk powder producers should provide resources to cope with demand.
 The government should support to the local milk farmers.

Table of contents
CHAPTER 01
Introduction………………………………………………………………….3-11
(I) Background of the study
(II) Problem statement
(III) Objective
(IV) Significance of the Study
(V) scope
(VI) Limitation
(VII) Map of area
CHAPTER 02 Literature
Review………………………………………………………………………..12-15
(I) Theoretical part
CHAPTER 03
Methodology…………………………………………………………………….21
(I) Sample and Population
(II) Data Collection Method
(III) Data Analysis
(IV Limitations
CHAPTER 04 Data Presentations and
Analysis……………………………………………………………………….17-24
CHAPTER 05 – Recommendations and
conclution……………………………………………………………………..25-32
(I) Recommendations
(II) Factors and overall dairy product in milk industry
(III) Conclusion
References....................................................................................................................................33
Appendix...........................................................................................................................................

CHAPTER 01
1.1 INTRODUCTION
Humans are exposed to melamine and its analogues from a number of different sources,
including food and environmental sources. Sources range from breakdown of the pesticide
cyromazine, which is approved for use in many countries, to migration from approved
food packaging material to the adulteration of specific foods. A specific source of
exposure for which very few data were available is carryover from the (mostly non-
approved) presence of melamine in animal feed or feed ingredients. So milk powder is one
of it.
In Sri Lanka there was a major demand to the imported milk powder. Recently food
control administration unit has founded that the D.C.D (Dicyandiamide) is included in the
imported milk powder. This problem was major issue to the Sri Lanka’s milk powder
market. At those days most of Sri Lankan’s addicted to the imported milk powder than
local products. Milk powder can considered as a compulsory good for customers .due to
this issue consumers happen to face many difficulties to fulfill their consumption of milk
powder.
Nitrate leaching is a concern around the world, as nitrate can contribute to eutrophication,
and may also cause health problems in formula-fed infants. Agricultural industries around
the world are becoming increasingly regulated to reduce the losses of nitrate and other
nutrients. Stocking and fertilizer application rates in Ireland and other European countries
are being restricted, which could have severe financial implications for farmers.
Grazing animals have profound effects on pastoral systems including nutrient removal by
grazing and redistribution through excreta. Generally, in grazed pastures the conversion of
consumed N into product is low and a substantial quantity of N is recycled through the
direct deposition of animal excreta. This low N utilization by grazing animals reflects the
relatively high concentrations of N required for metabolic functions and optimum growth
of plants compared to that needed by the grazing ruminant for amino acid and protein
synthesis.

While several studies have estimated the reductions in emissions with DCD, the nature
and longevity of the biophysical disappearance of DCD in soil (i.e. biological
decomposition and physical loss through surface runoff and leaching), which control DCD
effectiveness, are not well understood. In an incubation experiment with
and grassland soils, the DCD degradation rate differed between different types of soils.
DCD is known to decompose more rapidly in soils with high organic matter content and
the fate of DCD in soil might be affected by sorption onto soil organic matter .In
incubation experiments with grassland soils; the half-life of DCD was longer at a higher
rate of application. However, the reason for this is not clear. In European countries, a soil
temperature increase of 10[degrees]C doubled the degradation rate of DCD in grassland
soil .Published data from incubation experiments indicate that the half-life of DCD is
strongly affected by soil temperature, showing an exponential decrease as soil temperature
increased.
However, these findings are mainly based on controlled laboratory experiments, and there
are still uncertainties in our understanding of the biophysical disappearance of DCD in
field conditions. Simulated the effects of DCD on emissions using a process-based model,
but was unable to incorporate the effects of temperature and soil type on the half-life of
DCD. Moreover, there is little available information on the effect of amount and source of
N input on half-life of DCD. Improved understanding of the processes affecting DCD
half-life under field conditions is needed to refine estimates of the effects of DCD on
emissions by existing process-based models and to provide strategic management plans for
maximizing the effectiveness of DCD in the field. These results suggest that soil
properties, DCD application rates, and climate factors affect the biophysical disappearance
of DCD, and further studies are now needed to improve our understanding of the
characteristics of the biophysical disappearance of DCD.

The objectives of this study were to examine seasonal variations in the biophysical
disappearance of DCD in soil, to assess the effect of N source on DCD degradation, and to
determine the major factors controlling seasonal variation. In this study, the measured rate
of the biophysical disappearance of DCD was the net result of several processes, including
the biological decomposition of DCD in soil, the physical movement of DCD from plant
canopy to soil, and DCD movement in the soil (e.g. runoff and leaching following
rainfall). We had three major hypotheses, the half-life of DCD in soil does not differ with
the amount of DCD application, the addition of different sources of N (urine or synthetic
N fertilizer) has no influence on the half-life of DCD in soil; and, seasonal variations in
soil temperature affect the half-life of DCD in a soil. Rainfall is also likely to affect the
rate of leaching of DCD in soil; however, this effect was not quantified.
Dicyandiamide, or DCD, is a chemical compound used by farmers to reduce the negative
effects of greenhouse gas emission and nitrate leaching into waterways. It has also been
reportedly used to promote the growth of pastures where cows graze. Furthermore,
dicyandiamide is a nitrogen-rich compound, classified with compounds such as melamine
as a potential economic food adulterant, to enhance the apparent protein content of the
food product. An official who did not wish to be named stated that banning of all imported
milk powder will lead to a massive imbalance in demand and supply of milk powder as Sri
Lanka does not have a sufficient supply of milk.

1.2 Problem statement & Justification
 Whether the D.C.D is unhealthy to human body or not is yet to be determined.
Dicyandiamide (DCD), is a chemical compound used by farmers to reduce the negative
reportedly used by some to promote the growth of pastures where cows graze.
Furthermore, dicyandiamide is a nitrogen-rich compound that is classified with
compounds such as melamine as a potential economic food adulterant to enhance the
apparent protein content of the food product. Cows eating contaminated grass may
produce milk with traces of DCD residues.
Information on whether dicyandiamide or DCD has unhealthy effects on the human body
is yet to be determined, Minister of Technology. Speaking at a press conference held in
Colombo they said that claims that companies have made that DCD is not dangerous to
humans however cannot be accepted either. The Minister said that it had been proven that
the chemical melamine, which is created when two DCD molecules combine, has adverse
effects on the body while adding that it would take extensive testing to determine the true
facts about DCD. They claimed that he stood for the children of the country who had the
right to reject food containing artificial chemical ingredients in it while stating that they
will not be turned into test subjects for foreign laboratories.
Reports of dicyandiamide (DCD) and whey protein allegedly found in milk powder have
sparked widespread panic among consumers, but little do they know that vegetables they
consume are equally if not more contaminated, according to a recent study on the use of
agrochemicals by farmers. Federated Farmers says continual testing for impurities and
open disclosure is why some countries primary exports are of the highest quality..

Story Highlights
 Sri Lanka halts imports of milk powder from New Zealand and Australia.
 The import ban comes after a botulism-causing bacteria was found in the product.
 Milk powder maker Fonterra is the world’s largest exporter of dairy products.
 No reported illnesses yet; Fonterra says it’s working with client companies.
Sri Lanka has halted all imports of milk powder from New Zealand and Australia after a
company in New Zealand disclosed that three batches of an ingredient used in sports
drinks and baby formula tested positive for a strain of bacteria that causes botulism.
The New Zealand-based Fonterra Group said that three batches of its whey protein tested
positive for the Clostridium botulin bacteria. Those batches weren’t for use in Fonterra-
branded products, but they said companies that used the whey protein in their products
might issue recalls.
 The trust that has remained to the imported milk powder has broken. Therefore
they happen to shifted to the other alternatives. It is a big issue to the customers.
The issue concerning DCD or dicyandiamide in imported milk powder is the current topic
of discussion. Sri Lanka’s Industrial Technology Institute (ITI) reported the powder
contained the dangerous fertilizer chemical dicyandiamide (DCD), which Fonterra and
New Zealand scientists are now disputing. They insist that ITI does not have the
technology to test for DCD while ITI recently rejected that claim. The issue has sparked
controversy and heated discussions between various parties. Milk food companies have
been directed to immediately remove from circulation all known milk powders found by
ITI to contain DCD.
The Health Ministry earlier released a statement which revealed that all the milk powder
imported from New Zealand was tested for the Clostridium Botulin bacteria while all milk
powders that were found to be free of the bacteria were released from the port.

The food administer committee of the health ministry has decided to release to the market
few brands of imported milk powder and infant formula as the ministerial subcommittee
appointed to look into the safety of imported milk powder has found no botulin bacteria in
the following milk powder containing whey protein a media released issued by health
ministry has stated that on directives of the ministerial such committee the food advisory
committee has taken step it release few name of the brands of the milk of milk and infant
food to the market two separate bodies continue the ongoing testing processes in
connecting with dicyandiamide (DCD) by the industrial technology institute(ITI) and
botulinum bacteria by medical research institute(MRI).
The health ministry’s established the special unit to coordinate inspecting processes in
regent to the imported milk powder available country wiled wide the health ministry has
taken precautionary measure to ensure that the best is given to the people and to ensure
safety of their health. Fontera co-operative group limited announced it has decided to
temporary suspend its consumer operation in SriLanka because of the unstable situation at
the moment.
 Whether the D.C.D is unhealthy to human body or not is yet to be determined.
Dicyandiamide (DCD), is a chemical compound used by farmers to reduce the negative
reportedly used by some to promote the growth of pastures where cows graze.
Furthermore, dicyandiamide is a nitrogen-rich compound that is classified with
compounds such as melamine as a potential economic food adulterant to enhance the
apparent protein content of the food product. Cows eating contaminated grass may
produce milk with traces of DCD residues.

Information on whether dicyandiamide or DCD has unhealthy effects on the human body
is yet to be determined, Minister of Technology.Speaking at a press conference held in
Colombo they said that claims that companies have made that DCD is not dangerous to
humans however cannot be accepted either. The Minister said that it had been proven that
the chemical melamine, which is created when two DCD molecules combine, has adverse
effects on the body while adding that it would take extensive testing to determine the true
facts about DCD. They claimed that he stood for the children of the country who had the
right to reject food containing artificial chemical ingredients in it while stating that they
will not be turned into test subjects for foreign laboratories.
Reports of dicyandiamide (DCD) and whey protein allegedly found in milk powder have
sparked widespread panic among consumers, but little do they know that vegetables they
consume are equally if not more contaminated, according to a recent study on the use of
agrochemicals by farmers. Federated Farmers says continual testing for impurities and
open disclosure is why some countries primary exports are of the highest quality..
1.3 Objectives
 To study the impact of D.C.D on the consumer usage of milk powder.
1.4 Significance
The health Ministry also said it would not issue a warning or instruct the withdrawal of
imported milk food from the market because the tests carried out in foreign labs on
samples sent by the ministry showed they contained no DCD. The ministry said that all
imported milk powder were tested for DCD prior to shipment and after the consignment
arrived.

Tests carried out on 148 samples in SGS Laboratory in Thailand showed there are no
harmful substances in them. If test results prove that samples contain DCD, the Health
Ministry insists it would not hesitate to ban the sale and use of powdered milk. But other
officials have pointed out that the health Ministry only sent samples after the ITI had
instructed them to do so and the institution does not have the facilities to test for DCD.
This tug of war between the ITI and the Health Ministry was further widened when the
Government Medical Officers’ Association (GMOA) charged last Thursday that ITI had
detected (DCD) in all of them, but the Health authorities had not taken any action to ban
those products. Giving a list of the brands and the results to the media the GMOA insisted
that a warning must be issued by the government forthwith calling for consumers to switch
to locally produced milk powder.
In Sri Lanka, The problem reached a crescendo when the Health Ministry, on the basis of
tests initiated by the Ministry of Technology and Research and carried out by
the Industrial Technology Institute (ITI) , the country’s premier scientific and industrial
research organization, had held a meeting with the GMOA, Food and Drug Authority and
the Food Advisory Committee on August 6 and agreed to have all the batches of the milk
products which tested positive for DCD removed from the market as soon as possible.
The Island of a senior Health Ministry official stating "all tests on food items would be
conducted by the ITI henceforth. The ITI investigations have established that the
imported milk powder is tainted with DCD. In this backdrop, the Fonterra Group in Sri
Lanka held a press conference 8 in Colombo where its team lead by Leon Clement, MD,
and Executive Director Alan Fitzsimons attempted to vindicate the company by
challenging the accuracy of the ITI tests.
Leon maintained that it will respect the Ministry of Health order and that approximately
39 mt or approximately 100,000 400gm packs of the products from the two batches will be
removed from retail shelves within 48 hours. Dr. Sarath Mahavithanage, Associate
Director Regulatory and Scientific Affairs lead the arguments on behalf of the company.
He said he was willing to back his entire reputation on his argument that the tests
conducted by the ITI were inadequate. He quoting Dr. Brynn Hibbert, Emeritus Professor
of Analytical Chemistry at the University of New South Wales, Sydney who had said in

his expert opinion the preferred method involved for the detection of DCD is Tandem
Mass Spectrometry and without this technique the presence of DCD cannot be determined
and that the method used by the ITI was inappropriate to unequivocally show the presence
of or determine the quantity of DCD.
However, such a directive would far outweigh supply and result in massive
market shortages. It is clear that the Health Ministry has to make a trustworthily
transparent disclosure about the testing while the government has to push ahead to
improve capacity and supply chain bottlenecks that are preventing locally produced milk
powder and liquid milk from reaching the public at a reasonable price.
1.5 Scope
Among the DCD projects that are conducted in the country “municipal council area of
Galle” has been selected as to carry out the research.
1.6 Limitations
 Some people may not contribute fully in providing the most accurate details
about the research.
 Issues regarding time management.
 We get only 50 family members in nearly municipal council area of Galle.
1.7 Map of study area

CHAPTER 02
1.1 LITERATURE REVIEW
Sri Lanka’s health ministry has recalled two batches of milk powder made by Auckland-
based dairy giant Fonterra. The products contained the chemical dicynamide. D.C.D is an
agricultural chemical. In New Zealand it is used to increase grass growth and reduce
nitrate leaching from the soil into reveres and streams.
The Ministry further states that similar tests will be mandatory in the future on all
imported milk powder stocks before they are released from the harbor. The Health
Services Director General had halted the release of all imported dairy products containing
whey protein from the port after New Zealand warned international health authorities that
several dairy products may contain a bacteria that could lead to botulism.
New Zealand-based dairy giant Fonterra Co-operative Ltd had withdrawn milk
powder under orders from the Sri Lankan authorities for showing traces of the toxic
agricultural chemical dicyandiamide (DCD), although it disputed the accuracy of the
testing.
Is this is a legitimate problem or it is a problem created by the nationalists who want to get
a competitor out of the way? I am confident it is the latter – let us tell you why.
First, let us put some thoughts forward, if we are interested in our kids health.
 Heavy metals, Phthalates and Azo dyes in children’s’ products are banned and very
low amount of maximum residue limits are allowed in test reports when these are
exported to the US and the EU. But, if we pick up some samples of plastic toys
and test them in an accredited laboratory – all these toxic chemicals are present
abundantly in them.
 We export fish to the EU, Japan and other countries. These countries very rightly
have regulations on Mercury and Cadmium in fish. The fish exported are tested
and only that pass this standard is exported. Others that fail are given for local
consumption. There are many more examples of this nature, if we care to look.
This is because we have no standards or regulations for such highly toxic,
carcinogenic residues. Sri Lanka Standards, which falls under the Ministry of
Science and Technology, is the authority to come up with standards to regulate

them in the local market. But, there are no standards. That’s how much we care for
our people and our kids.
Coming back to DCD, there are many questions,
1. The Industrial Technology Institute (ITI) report’s conclusion doesn’t say in which
batch or which brand the DCD was found – just that the local brands are free and
foreign brands are contaminated. No specificity and no traceability given,
something a scientific report will always mention in its final finding.
2. The conclusion also says that the accuracy of the method (ITI used) cannot be
determined. Based on this conclusion, ITI goes to the media and confuse the
people.
3. ITI has found DCD in Maliban products, which imported from Australia and they
have not used DCD for 100 years!
4. ITI doesn’t have LCMSMS, the required technology for the accepted method. And
they have no accreditation for this test method, a must when a laboratory testing is
challenged in courts.
5. ITI hasn’t given a reference sample to retest in another laboratory, a practice any
good laboratory must have to display the accuracy of its testing capability.
6. ITI has not participated in an inter laboratory testing for this analysis, nor used
certified reference material, a necessary requirement to validate its results.
Sri Lanka Accreditation Board which has given accreditation to ITI for other tests must
evaluate their credibility as a scientific institution on continuing their accreditation when
ITI misleads public, decision makers and international market in such a way.
The ITI’s Head of Chemical and Microbiological laboratory, J K A B Wijegunesekara,
maintains that the ITI’s technique is well founded and adheres to clinical scientific
procedure. "The test is conducted in two phases. First there is the preparatory phase which
involves preparation of the sample for High Performance Liquid Chromatography. In our
case the detection was though a UV detector. The other method is to use Mass
Spectrometry. The difference here is that while UV detection can unequivocally determine
the presence of a substance and in this case DCD, Spectrometry can be more accurate in
the determination of the exact quantum", he said.

They drew the attention of the ITI to two points of concern that Dr. Hibbert had
made including accreditation of the test procedure and the use of Certified Reference
Material. Cawthrorn Laboratories are accredited to the international standard of ISO/IEC
17025 for the tandem mass spectrometry test according to their website. According to Dr.
Sarath Mahavithange "the fact that Cawthron is certified automatically means that they
are in possession of Certified Reference Material (a scientifically analyzed sample of
DCD in Milk Powder for the layman).
Health Ministry spokesman W.A.D. Wanninayake yesterday told the Sunday Observer
that the seven samples of full cream milk reported by the media to have been banned ,
were in fact not banned, and orders had been given to release them to the open market.
They were found to have no Dicyandiamide ( DCD) and permission was given to release
these brands. He said that the milk powders that were banned were not branded as
reported. “They were full cream milk powder which came without a brand on arrival to
the Port. The branding is done later by the manufacturing or supplying company.
Asked what steps the Health Ministry was taking about the presence of whey protein
concentrates, (Clostridium Botulin) the virus carrying the infective agent causing Botulism
which could cause severe diarrhea and severe neurological effects, he said the seven
member ministerial committee appointed on a directive by the Health Minister to probe
the milk contamination issue which had met the Minister on Wednesday, had decided to
intensify the search for contaminated milk products in the local market. The Food
Advisory Committee of the Health ministry has decided release ten brands of milk powder
and infant formula as it has found no botulin bacteria in them containing whey protein
according to a media release.
Media reports indicate that this was the third product contamination scare in five years for
the company entrusted with so much sway over Sri Lanka’s consumers. The levels of
DCD (the nitrate inhibitor dicyandiamide) found in New Zealand milk last January,
though according to the company was harmless, suggested Fonterra had under-valued the
importance of consumer perception.

According to media reports, the issue which dragged across 14 months where a potentially
deadly bacteria in a "dirty pipe" at the Hautapu dairy factory near Cambridge
contaminated 38 tons of whey protein concentrate, since used in thousands more tones of
products including protein and sports drinks, infant formula, other nutritional products and
calf feed and distributed around the world. About 20 tons of concentrate was soon sent to
beverage manufacturers whose high-temperature treatment processes kill any spores. The
remaining 18 tones sat in storage to be turned into infant formula and other nutritional
products. It was not until March, 10 months after manufacture, that testing at the
company’s Darnum Park milk powder plant near Melbourne detected traces of
Clostridium, a large "family" of organisms which can produce hundreds of strains of
bacteria, some linked to food poisoning.
The report further quotes the company as having said that it did not immediately put the
concentrate on hold because the samples were within acceptable limits and there was no
suggestion of a botulin strain - but launched further testing to isolate the bacteria. It says
identifying the potentially deadly Clostridium botulinum toxin took a further four months.
Sri Lanka's Milk is said to be the most complete food item because of its great biological
value as it contains a variety of nutrients and these nutrients in milk help make it nature’s
most nearly perfect food. Improving human nutrition plays an important role to achieve
food security. Dairy products have a unique contribution to nutritional status as well as
health status of the smallholder household members.

CHAPTER 03
3.1 Methodology
The purpose of this chapter is to present the philosophical assumptions underpinning this
research, as well as to introduce the research strategy and the empirical techniques applied.
The chapter defines the scope and limitations of the research design, and situates the
research amongst existing research traditions in information systems.
This project will utilize both quantitative and qualitative data collection tools, but is rooted
in a qualitative epistemological position that recognizes the importance of locating the
research within a particular social context. It also takes seriously the social construction of
these contexts and the identities participants construct within them.
Data collection will consist of surveys, books, newspaper observations and interviews with
group members, as well as journal logs from internet. Initially, a survey instrument to
measure teacher attitudes and beliefs regarding professional roles and responsibilities will
be administered to a broad spectrum of participants Subsequently, a purposeful sample
will be identified to participate in the second round of data collection.
This report describes the research methodology used for the Modular Grants Application
Process Outcome Study. More specifically, this paper is divided into three sections that
describe the sampling, data collection, and 50 milk powder consumers involved in the
outcome study.

CHAPTER 04
4.1 Analysis
Recruitment questionnaires were analyzed to confirm consumer behavior under the DCD
issue. All discussion sessions were audio taped and later transcribed to facilitate
interpretive analysis.
Data gathered through questionnaires in the quantitative phase was analyzed through
percentages. Data was summarized to provide the scores needed to answer the study
objectives. It has been presented in charts.
Monthly income of the families.
Through our analysis we could identify that income of most families we distribute our
questionnaire is below 40000.
The connection between no of family members in a family and no of milk powder
packets that a consumer buys for a month.
According to our analysis we could identify that when no of family members are
increasing no of milk powder packets that they buy for a month is increasing. So we can
conclude that most of the people prefer to use milk powder and milk powder has become
an essential good for most of the people. Due to this situation there is an inelastic demand
for the consumption of milk powder.

Used
imported milk
powder
76%
did not use
imported milk
powder
24%
Percentage of consumers
The usage of imported milk powder among consumers.
In Galle urban council most of the families used imported milk powder before the DCD
issue arises. But after the DCD issue arises the buying behavior of the consumers have
been changed.
After the DCD issue most of the consumers prefer to use local milk powder and other
substitutes such as fresh milk, pasteurized milk, milkmaid and other dairy products.

A
18%
B
58%
C
11%
D
5%
E
8%
After the DCD issue arise the reaction of consumers who used imported milk
powder.
We could identified that most of the people who used imported milk powder pretend to
use imported milk powder after the DCD issue because 58% of people answered that they
are buying local milk powder now. Some people still buying imported milk powder but
they have reduced the consumption. While some people do not change their consumption
only 11% of families tend to use fresh milk and 5% of families quit the consumption of
milk powder.

I
33%
II
67%
Among the people who have not change the consumption, 33% of people have not change
the consumption because of they have not provided enough knowledge about the DCD
issue.67% of people have not change the consumption due to their personal preferences.
Most of the people who have quit the consumption of milk powder have shifted to
substitutes (64%) while 36% of people have not shifted to substitutes.
Prefere to use
substitutes
72%
Did not change
the
consumption to
substitutes
28%
0%
0%

Among the people who have reduced the imported milk powder 41% reduced their
consumption in large percentage. That means imported milk powder is not an essential
good for them and we could consider that the demand is elastic.59% of consumers reduced
the consumption in small percentage that means imported milk powder is an essential
good for them and we could consider that the demand is inelastic.
Reaction of the consumers after media announced that imported milk powder do not
contain DCD.
Large
Percentage
41%
Small
Percentage
59%
I
28%
II
72%

After the people were educated that imported milk powder do not contain DCD most of
the people have not change their present consumption.(72% of people). But some use to
buy imported milk powder again.
Part (c)
The reasons for consumers not shifting from imported milk powder to local milk
powder before the DCD issue arises.
According to our analysis we could identify that most of the customers do not use local
milk powder before the DCD issue because of they faced many difficulties when buying
local milk powder and they were addicted to the taste of imported milk powder. Some of
the customers do not use local milk powder because of they faced difficulties when mixing
the milk powder with water. Imported milk powder mix with the water than local milk
powder because local milk powder curdle. With comparing to imported milk powder the
standard of the local milk powder is low and imported milk powder companies have a
strong brand name than local milk powder companies.
The reasons for consumers not shifting from imported milk powder to fresh milk
before the DCD issue arises.
Most of the customers do not prefer to use fresh milk, because fresh milk lasts only 2 days
in the refrigerator before it begins to curdle. This curdling often results in a strong odor
and can affect the taste and smell of other food products with the milk.
With comparing to milk powder A packet of milk powder is generally less expensive than
a gallon of fresh milk and fresh milk require expensive refrigeration. Some said that they
liked the taste of milk powder than the taste of fresh milk.
Also the study showed that there is low supply of fresh milk products in Galle urban
council. There were some complaints about having no serious distribution and the current
distributions so inefficient.

Consumer’s ideas about the DCD issue.
Regarding to our analysis consumers have known, DCD is a harmful chemical that affect
to the human body. They know that this chemical will affect the human body in their
future, life time and they will have to face illnesses due to DCD. Most of the people do not
have sufficient knowledge about DCD. Due to the DCD issue there created impatient
situation in the market.
Suggestions to overcome the DCD issue.
Consumers have proposed to, improve local milk powder market and also government
should get steps to develop & maintain stable market for the milk powder also they have
proposed that rear a cow in each house to provide their day to day need instead of using
imported milk powder. Some said that Government Medical Officer's Association should
be responsible to this issue.
The substitutes that are used by people who arenot using the imported milk powder
and reasons for not using imported milk powder.
50% of people have being using local milk powder and 25% of people prefer to use fresh
milk. Some people used fruit juice. Only few people prefer to use herbal drinks. No one
used carbonated drinks.
A
50%
B
25%
C
8%
D
17%
E
0%
F
0%
Pecentage of consumers

Most of the people do not use imported milk powder because of their personal preferences.
It is about 54% from the total. Some people said that imported milk powder is expensive
than local milk powder that is why they have not being using it. 23% of consumers said
that they do not trust the quality of imported milk powder while 8% mention different
reasons. Some local milk powder users use it as a support for SriLankan economy. Most of
the fresh milk user’s use it as there is a farm nearby there houses and milk is distributed to
their houses by farmers. One consumer said that as he is a employee at the Milko Private
limited he get local milk powder for very low prices so that family prefer to use local milk
powder.
I
54%
II
15%
III
23%
IV
8%
Pecentage of consumers

CHAPTER 05
5.1 Recommendations
 The country has to promote consumption of local fresh milk.
In 1978, this country produced 80% of the milk required for consumption on the
island,today the number is 20%, due to the importation of cheap powdered milk products,
which are advertised heavily. One ad shows a child solving puzzles with the aid of
magical powders contained in a glass of imported milk. The government is considering a
further tax increase on milk powder imports. The demand for liquid milk in the country is
insufficient as people are used to buy milk powder due to its low price and convenience,
officials pointed out. But the consumption of fresh milk has been unduly overshadowed by
the influence of the imported milk powder propaganda campaign, officials alleged.
Sri Lanka's fresh milk is already expensive with a state mandated purchase price of milk
being raised periodically, putting fresh milk out of reach of the less affluent citizens,
especially those who do not own refrigerators. Lower prices however would encourage the
consumption of fresh milk and reduce protein malnutrition among poorer sections of the
population. Many Sri Lankan diary farmers, who are politically backed with protectionist
taxes imposed on citizens to block their access to cheaper milk, own low yielding cows,
though there have been attempts to introduce high yielding cows.import tax work by
inflicting harm of the poorest sections of the population as richer citizens would continue
to consume despite high prices.
The Government through the Agriculture and Livestock Ministry will launch a national
level program to establish 1000 “Dairy Farmer Villages” countrywide to empower the
large number of dairy farmers socio-economically and increase the local dairy
production.At the initial stage, the Ministry will set up 50 dairy farmer villages in several
districts including Badulla, Kandy, Matale, Kurunegala,nuwara eliya ,Anuradhapura,
Polonnaruwa, Ampara, Jaffna, Trincomalee and Puttalam districts before the end of this
year.

The role of government and policies in dairy development
1. Government investments in large operations usually fail.Public sector involvement
is best restricted to selected co-financing arrangements and public–private
partnerships that encourage private sector investment.
2. Limited land ownership constrains the ability of many dairy farmers to grow
quality fodder for cattle. Governments should look for innovative ways to support
pasture or fodder development and better use of public land. This could include
options for leasing communal grazing land or public land.
3. A critical government support to industry development is the reduction of barriers
to trade, in particular import tariffs on equipment, animals, raw materials and other
inputs. In addition, it is important to eliminate subsidies on inputs, including
veterinary drugs, vaccines and AI services, to avoid market distortions. The private
sector has difficulty engaging in milk collection and processing in areas with low
volumes. To resolve this issue, many countries, through private sector or
government-supported economic incentives.
4. Pricing policies that fix milk prices based on the cost of production or other
calculations can be detrimental to sector development. This includes price setting
by national agencies, cooperatives or municipalities (India, Pakistan, Sri Lanka). In
some cases, such as Thailand, high administered prices supported industry
profitability. However, with the proliferation of bilateral and regional trade
agreements and increased market access for dairy products from competitive
suppliers, these policies may not be sustainable.

 Local Milk powder producers should be provided resources to cope with
demand.
Local milk powder producers have admitted that they are struggling to cope with the
demand for their products following the drop in public demand for imported dairy
products due to recent health scares. A recent survey carried out by The Nation’s
Investigations Desk among retailers revealed that domestic milk powders are unavailable.
so we could not cope with the rapid increase for local milk powder products due to limited
resources. While admitting that there was a shortage of milk powder in the market, the
official pointed out that local producers need more resources such as machinery and
manpower to increase production.
The demand for domestic dairy products increased rapidly due to DCD
contamination and other health scares associated with imported milk powder. Tests carried
out by the Industrial Technology Institute (ITI) revealed that certain batches of imported
milk powders contained DCD while locally products such as Highland and Pelwatte were
declared safe.
 The government should support to the local milk farmers.
SriLanka is heavily dependent on imported milk, as the domestic production of milk is
only around 25 to 30 percent of the total national requirement. Although the government
has elaborate plans to increase national production and attain a higher degree of self-
sufficiency in milk by 2016, the efforts seem to have encountered several snags .Sri Lanka
spends around US$ 400 million a year on the importation of milk powder, and
international prices of dairy products continue to rise dramatically. While the milk powder
importers has dominated the milk industry all this time, people have no choice but to
purchase milk powder at their price as they have no other alternative.
However with milk powder prices ever increasing the government has focused its attention
on developing the dairy industry with the aim of increasing domestic milk production to
meet the national requirement.
The dairy activity of the Dry Zone Livelihood Support and Partnership Project is a
demand driven and innovative approach to poverty reduction in Sri Lanka which moved
away from the conventional free grazing system. In the last three years milk production in

four projectdistricts has grown substantially. The growth is supported by rising demand for
milk and strong marketing linkages established with several major buyers and processors
in the country.most of whom used to be conventional cattle farmers,and transformed them
into entrepreneurs of three to five protected cow units. Country‟s milk processing
companies, known as keeping a distance from rural areas, are now partners of the project
in purchasing the produce and sharing the investment in the value chain. Despite Sri Lanka
having ideal environmental conditions for expansion of domestic milk production. .
Although the Government of Sri Lanka has implemented several programmes in the past
to develop milk production, the national milk production has not responded due to
problems
including low farm gate prices, poor profitability associated with milk production,
ineffectiveness of extension services and poor marketing system. However, with the
increasing prices of milk produced in Sri Lanka caused by a continuously rising global
prices of milk in the past two years, the domestic milk production activity has boosted
significantly.
 Promoting project farmers to move into dairy farming by providing them with
institutional and other support such as assisting them in the formation of small,
cohesive groups focused on dairy farming in the village,providing advisory
services and financial assistance to purchase cattle and build cattle sheds .
 encouraging farmers who are already engaged in dairy farming to increase the
number of cows by helping them find suitable cows and obtain bank loans .
 increasing the amount of milk obtained per cow by teaching farmers about
improved methods in cattle feeding, breeding, milking and other livestock
management practices .
 Strengthening market linkages by supporting milk collection centers and
introducing milk routes .
 Providing advice to farmers to improve milk production and maintain good quality.

 Collective farms
Farmers are grouped into a farm model in which all the cows are milked by machine. A
local investor/builder constructs the dairy facility, supplying all the capital. the village
director settled the debt with the builder by identifying individual producers to purchase
stall space within the barn. While the operation is run by a village committee, individuals
own the stall space and assume full management of their cows, including feeding. Milking
machines, however, are owned by the company, in this case the New Hope Dairy Cattle
Company. A member of the collective supervises the milking and keeps records of the
amount of milk produced by each cow. A local company collects the milk. One of the
obvious constraints to extending this type of operation is geographical access to facilities.
Farmer-managed milk collection stations in some areas are preferred to the milking
stations owned and managed by processors because farmers are less at risk from
monpsony pressures, such as the power of relatively few processors to control prices. In
cases such as China, increased competition between processors results in lower prices to
producers; management and control of some of the dairy infrastructure provides producers
with more market power.
 Private dairies
Reflect one of the numerous opportunities for linking processors to producers. The
institutional links with the producers, however, can differ depending on the circumstances.
Typically, processing companies procure milk through village agents who have a personal
connection with producers. The processor occasionally has direct interaction with the
producers; however, usually the milk price is negotiated directly with the agent. This
limits price transparency to producers and reduces their market power as well as incentive
to provide quality, unadulterated milk. Some processing companies operate a payment
scheme that is transparent with various check points, including random individual quality
checks. This more direct contact with producers provides incentive for ensuring milk
quality at the farm level.

5.2 Factors and overall dairy product in milk industry
5.2.1 The economic considerations
 Price fixing, combined with inefficient processing by the leading processors,
results in many cases in low profit margins for dairy producers (Sri Lanka). This,
combined with a lack of a clear dairy development plan, constrains incentives to
invest in or expand dairy operations.
 Investment needs to be accompanied by technical and management training for
entrepreneurial dairy producers. This ensures that each link in the dairy chain is
profitable and encourages private sector investment, particularly in dairy
development activities focused on smallholders.
5.2.2 Social-cultural-environmental considerations
 urban populations in countries that were traditionally non-milk drinking and/or
lactose intolerant are increasing consumption of ready-to-drink processed and
cultured milks. Consequently, there are new opportunities for sector development
even in countries that don’t have a tradition or seem to be less competitive in dairy
production.
 Women in many countries do most of the dairy-related activities. For example, in
Sri Lanka, women are the majority members of registered dairy cooperatives but
they aren’t represented in management or executive committees. This implies that
dairy development planning needs to include a gender focus. households selling
milk have estimated average incomes three times higher than the households not
selling milk. With 30 percent of dairy households headed by women, this
transforms dairy production into an important livelihood opportunity for rural
households. Recognizing this, some banks, such as the Grameen Bank in
Bangladesh, specifically target the lending programmers, which lend at reduced
rates, at women and port households.

5.2.3 Technical considerations
 Smallholders need an accessible and affordable but complete package of support
services to produce milk competitively. Cooperatives provide these services.
However, in increasingly competitive market environments, the private sector
often collects the milk but doesn’t actively backward invest in dairy development
activities. Smaller companies. Clear economic incentives from the government,
through tax rebates or other economic stimulus options, could motivate the private
sector to invest in enhancing the on-farm productivity of suppliers.
 Technical know-how and skills delivered through practical and accessible
vaccination and outreach training organized by the government are equally
important This includes business management skills that are critical to ensuring the
development of the dairy activities as a dairy enterprise.
 In most countries, simple changes in husbandry practices and the way stock is
managed would result in significant improvement in technical efficiency. This
includes feeding as well as access to water and simple technologies for cooling
animals in tropical climates. Feeding, in particular, is the key to enhanced
productivity because feed accounts for up to 70 percent of the cost of milk
production.
 Breed enhancement also can lead to increased productivity among producers.
However, the means of accessing improved animals needs to be considered, both
in terms of market distortions and in terms of private versus public services, such
as those for artificial insemination. In many countries, such as Sri Lanka and the
Philippines, markets can be created for dairy stock by encouraging the
specialization of production In the Philippines, the National Dairy Authority
collaborated with privately owned cattle breeding farmers, linking suitable
financing schemes for dairy animal production.
 Lack of small-scale cooling and processing units constrain farmers’ opportunity for
obtaining higher prices for their milk. In some cases, the units may be available but
ownership issues limit the power of the producers to receive a fair price.

Conclusion
The potential impact of "The impact of “Dicyandiamide” on the consumer usage of Milk
powder this term refers some health problem, effectiveness consumer behavior of on
imported milk powder. During this research report we gathered data and analyzed and we
used Questionnaires, face to face interviews finally we came up with better
recommendations for The impact of “Dicyandiamide” on the consumer usage of Milk
powder in municipal council area of Galle district. Main objective of this research is to
find out the consumption of imported milk powder in SriLanka after Dicyandiamide issue.
Through our analysis we could identify that after DCD issue affect to the consumption
pattern of the consumers changed thoroughly. Most of the families who used imported
milk powder tend to use local milk powder and fresh milk.
After the people got known about DCD issue through television, newspapers, internet and
social medias they happen to get a decision whether to use imported milk powder or not.
Also there was a curiosity among people, what is this DCD and how it harm to the human
body. Through communication Medias, people could get answer for that question also.
Then they could know DCD is a chemical and it will harm to future life time of humans,
especially small children may effect in their future.
To get recovered from this issue government should encourage local milk powder
providers and fresh milk providers. Then people can buy local productions without facing
difficulties in the market. Also government can go through people and give advices,
information regarding this.
Consumption of milk varies from person to person. This analysis can help the
multinational companies who provide milk powder, to understand the behavior of different
consumers groups and therefore to understand potential buyers for the product. Also this
can help the local milk powder providers, to understand their weaknesses and what should
add to improve taste and quality of milk powder to attract more customers. Also they can
know about current market share and what should do for increase the market share.

References
 https://www.google.lk/#q=dicyandiamide+in+milk+powder+srilanka
 http://www.nation.lk/edition/latest-top-stories/item/16839-hazardous-milk-powder-
sneaks-into-sl-market.html
 http://en.wikipedia.org/wiki/Fonterra
 http://feverishnewz.blogspot.com/2013/08/update-1-fonterra-suspends-sri-
lanka.html

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