Grain mills, animal feeds making units: about 30 percent of businesses not registered

About 30 percent of the businesses of the grain mills and animal feeds manufacturing units in Pakistan are not formally registered with any trade union or association. Sixty three percent of the businesses in the segment do not prepare financial statements whereas, 15 percent of the remaining have an audit of financial statements.
According to an update analyses show that the grain mills and animal feeds manufacturing units operate in a highly competitive market with a maximum amount of businesses having more than 10 competitors. The majority of segment relies on more than five suppliers who are not consistent in meeting and do not have a regular stream of customers. The businesses have no control on the pricing policy for their exports, which is government set, usually below the costs incurred by the mills. A large proportion of SMEs in the segment use banks to meet business needs, but are not paying for any insurance products.
International Finance Corporation of World Bank Group and State Bank of Pakistan in a joint study suggested creating awareness of SME specific products in the target market, the management will aggressively advertise various promotional programmes and sponsored events: Workshops will also be conducted to create awareness amongst business owners with Agriculture finance unit of the bank.
At present, study report pointed out that the Grain Mill Products and Animal Feeds segment in Pakistan is relatively unorganised with sales primarily generated via shops/premises and as in case of other such SME segments, having limited financial and banking history. The grain mill products and animal feeds segment is largely dispersed around the areas where they have high demand of their products. Animal feed mills are mostly located near poultry farms and grain mills are located close to their raw materials. This segment has limited exposure to financial institutions; however, demand for this segment is expected to increase substantially, given strong historical sales and increase in population.
According to joint study, animal feed industry has not yet developed to any sizeable extent in Pakistan. Feed is a major cost, of about 70 percent in livestock and dairy farming and its demand is continually increasing. Most of the farmers have about 75 percent of small land holdings on which most of the livestock population is concentrated. With growing trends towards the establishment of structured and corporate dairy cattle and buffalo farms in semi-urban areas of Pakistan, there is a substantial requirement of high quality animal feed. The nutrients available under the present pattern of feed utilisation do not meet the requirements of Pakistan's existing livestock population. There is comparatively poor nutrient composition of indigenous feed ingredients due to differences in varieties and use of improper soil fertilisers. Grain mills is an organised segment, which faces consistent demand throughout the year.
Study disclosed that this sector has strong export demands, however, unluckily their products are sold at low prices in order to gain a bigger share in the international market.
Research and statistics indicates that Pakistan has 215 feed mills, but only a few are preparing compound feed for livestock. Approximately 40 million tones of crop residues are produced annually in Pakistan of which 22 percent is contributed by wheat and 53percent by rice. The industry is currently working under 70 percent of its installed capacity.
Due to lack of proper storage facility, various agricultural products when produced have quite high moisture content and become liable to be affected with insect damage, auto-oxidation and fungal contamination. Improper storage, transfer, grading, feed milling and mixing of feed ingredients also affect the quality of feed. Therefore feed mills have to regulate their production schedule according to the effective demand from the livestock farm. There are approximately 915 Wheat mills all over Pakistan with the milling capacity of 77275MT tones daily.
Over the past couple of years, controlled sheds have made a growing presence in the poultry segment, which has improved this segment tremendously. This in turn has increased the demand of animal feeds to a great extent.
Recently, according to our primary findings, rice exports have significantly reduced which has affected the grain mills industry.
Commenting over the "Future Prospects", study report mentioned that the investment in dairy and livestock sector is increasing day-by-day and quality feed is a pre-requisite in profitable dairy and livestock farming. However there is a dire need of investments in animal feeds, as this industry is so vital for the growth of livestock through good quality feeds.
According to study, grain mils industry is showing steady improvement, however a lot depends on the economic and political situation of the country in the next few years.
The "Manufacturing Segment of Grain Mill Products and Animal Feeds" constitutes two sections Grain Mills and Animal Feeds Mill. Grain mill is an organised sub-segment with consistent local demand and supply with sales being mainly affected by the export demand. At present, the Animal
feeds mill sub-segment in Pakistan is relatively unorganised with sales being dependent solely on the poultry and livestock sector. Most of these businesses are family owned with members of one family serving different functions of business. Underlying issues inherent to each of the sub-segments include: 1) Willingness to Expand; 2) Inability to assemble and deploy intellectual, human and financial resources effectively; 3) Vision for growth; 4) Limited perception of business requirements; 5) Restricted funding sources and 6) Inability to deploy technology based equipment.
Study report pointed out that the grain mills products and animal feeds segment is mostly dispersed in Punjab and a few in Sindh near to poultry farms.
The business owners consist mainly of people in the age groups of 31-40 years and 41-50 years. Due to the labour intensive and manual nature of work, education is not considered as a major factor for business owners and they require a mixture of both skilled and unskilled workers. Predominantly businesses are run by families, preferring family members to undertake organisation functions.
Majority of businesses are run on partnership basis, which accounts for 56percent, with family members undertaking organisation function who later take over businesses.
Most of the business owners, around 67percent rely on the more than five suppliers to meet their business needs. The rest rely on between two to five suppliers, which account for 33percent. This segment depends on many suppliers for their raw materials and therefore not dependent on specific suppliers in meeting their business needs.
It was also pinpointed that the owners are mostly unaware of any SME segment specific efforts made by the Government of Pakistan however some business owners display awareness of loan products offered by banks and have availed the facility of loan products for business funding needs. A large number of business owners in grain mills and animal feeds use banks to meet banking and business needs availing the facility of business banking accounts but the owners are not keen to propose any feature or product to be offered by the bank.
However this segment at large is not aware of any specific products or services that may be suited to their needs and therefore not willing to use any financing or loan product to meet funding needs.