OUTLOOK OF BUFFALO DAIRY FARMS IN PAKISTAN Prepared by Syed Shakil Amjid & Muhammad Naveed Ul Haq Asia Dairy Network Working Paper 2
OUTLOOK OF BUFFALO DAIRY FARMS IN
PAKISTAN
Prepared by Syed Shakil Amjid & Muhammad Naveed Ul Haq
Asia Dairy Network Working Paper 2
i
The Asia Dairy Network (ADN) was established in 2012 by the Animal Production and Health
Commission for Asia and the Pacific (APHCA) as part of a Smallholder Dairy Development Program
supported by the Food and Agriculture Organization of the United Nations (FAO) and the Common
Fund for Commodities (CFC). The main objective of this network is to improve the communication
between the various dairy industry stakeholders in the Asia region so as to facilitate in the sharing
of knowledge and experiences.
The designations employed and the presentation of material in this information product do not
imply the expression of any opinion whatsoever on the part of ADN, APHCA, FAO and CFC
concerning the legal or development status of any country, territory, city or area or of its
authorities, or concerning the delimitation of its frontiers or boundaries. The mention of specific
companies or products of manufacturers, whether or not these have been patented, does not
imply that these have been endorsed or recommended by ADN, APHCA, FAO and CFC in preference
to others of a similar nature that are not mentioned.
The views expressed in this information product are those of the author(s) and do not necessarily
reflect the views of ADN, APHCA, FAO and CFC
Acknowledgements
We are thankful to Ms. Steffi Wille of European Dairy Farmers (EDF) and her team for extending her
support in data analysis.
FOR CORRESPONDENCE, PLEASE CONTACT:
Corresponding Author
Name: Syed Shakil Amjid Email: [email protected] Phone: +923008407924
ii
OUTLOOK OF BUFFALO DAIRY FARMS IN
PAKISTAN
Prepared by Syed Shakil Amjid* & Muhammad Naveed Ul Haq**
*Zonal Manager, Milk Procurement & Dairy Services Haleeb Foods Pakistan.
**Assistant Professor, Department of Animal Production, University of Veterinary & Animal
Sciences, Lahore, Pakistan.
iii
Abstract
This paper presents a brief situation analysis of typical dairy farm in Pakistan showing that lower
capital investment (sheds, machinery etc.) and operational expenses (cheaper feeds, family labor
etc.) are a source of competitive advantage for Pakistan dairy farms. The paper then argues that
poor economic growth and growing production costs are imposing huge burden on dairy farmers.
For instance, Feed prices have increased by over 50% in recent years making the profits to
reduce significantly.
The challenge is no doubt big and can only be addressed by addressing productivity constraints
so as to be able to capitalize on that the lower capital investment and non-operational costs of
milk production in Pakistan.
iv
Contents Acknowledgements ........................................................................................................................................ i
Abstract ........................................................................................................................................................ iii
Introduction .................................................................................................................................................. 1
Data Collection & Interpretation Methods ................................................................................................... 1
Milk Production & Disposal Trends ............................................................................................................... 2
Farm Land Use .............................................................................................................................................. 2
General Management Outlook ..................................................................................................................... 3
Herd Management .................................................................................................................................... 3
Feeding ...................................................................................................................................................... 4
Capital Investment Analysis .......................................................................................................................... 4
Operating Expense Analysis .......................................................................................................................... 5
Entrepreneurial Returns ............................................................................................................................... 6
Current Situation, Challenges & Future Options .......................................................................................... 6
References .................................................................................................................................................... 9
1
Introduction
Agriculture is the second largest sector of Pakistan, contributing nearly 21% to the GDP and
absorbs almost 45% of entire labor force in the country. Livestock is the major shareholder
within the agriculture sector; having 159 million heads of animal population, it contributes
53.2% to the agriculture value-added, and continues to grow at the rate of 4% annually. Among
all livestock products milk is the most vital as it provides relatively inexpensive and easily
available animal protein and minerals (Bilal & Ahmed 2004). Annual gross milk production in
Pakistan has reached 45 million tonnes. Buffaloes contribute almost 60% to total milk production
in Pakistan (Ministry of Finance 2009).
World buffalo population has touched 188.3 million heads. According to an estimate 97% of
total buffalo population is found in Asia. After India, Pakistan with 30.8 million heads has the
highest buffalo population in the world. It has the low-input -low-yield production systems,
animals are mostly fed crop residues and straw based diets; whereas, occasionally supplemented
with some concentrate feeds(FAO 2010)(Bilal &Hameed 2009). Because of high butterfat
constituents in milk, buffaloes are consumer’s choice all over the country (Cain et al. 2007).
Punjab province enjoys well developed canal system and five rivers passing through, make it
natural habitat of buffaloes. Almost 60.8% of Pakistan’s buffalo population resides in Punjab
province (Afzal 2006). Typical farms in Punjab comprise of 2-6 hectares of land and a herd of 2-
10 animals (Cain et al. 2007).
According to Pro-Poor Livestock Policy Initiative, the rural farms with 10 animals are becoming
more common in Punjab, and these medium type farms have the capacity to transform into
commercial entities (Garcia et al. 2003) yet major problems like poor genetic potential, low
quality feeds, high risk of diseases, volatile markets, burden of non-productive animals, lack of
technical expertise etc.(Sarwar et al. 2002); are not well documented in terms of economic
parameters. The farm data recording and analysis system is poor to provide any reliable picture
of the system to the stakeholders. Hence, one could neither know nor predict the economic
situation of buffalo farming system. Present study targets medium size dairy buffalo farms in
Punjab to give a better economic picture for enhanced understanding as these farms have the
potential to convert into viable business units in near future.
Data Collection & Interpretation Methods
For data collection, nearly 150 farmers were visited and 26 representative farms were selected on
the criteria as follows:
1. Farmers have at least informal records in their expense books etc.
2. Farms represent typical situation in Punjab
3. Farmers are willing to share their income related details
Requisite information was collected through face-to-face interviews with farmers, consultation
with farm records and visit to the barns for the period of June 2008 to June 2009. Entire cost
related data was converted into Euro (€) and total milk production was harmonized to energy
corrected milk at 4% fat and 3.4% proteins. Calculated values of dairy enterprise were divided
by ECM of milk calculated.
2
Questionnaire and Cost of Production (COP) analysis model of “European Dairy Farmers” was
used for data collection and interpretation. Whereas, data on current situation of Pakistani
dairies, was taken from historical trends and contemporary resources.
Milk Production & Disposal Trends
The herd size had direct impact on the gross production of the farms and averaged to 19 animals
per farm; strengthening the fact that region’s milk production is still based on higher number of
animal and not the production per animal. Milk production was observed to be around 2,702 kg
ECM per buffalo; fat and protein were recorded 6.50% and 4.22%, respectively.
On an average 50 tons of energy-corrected milk (tECM) was produced in the accounting period
with a range of 16 - 81 tECM per farm.
Marketable milk production stood 50
tECM and actual marketed produce was
recorded as 43 tECM. These findings
revealed that nearly 4 tECM was used at
the farm and about3 tECM was wasted
in the pre-marketing processes (Figure
1).
Similar results were reported in a study
conducted by FAO in 2003 in Punjab,
Pakistan, rural farms with average of 10
buffaloes produced 2,257 kg ECM and
sold almost 90% of their milk produced
(Garcia et al. 2003). However, some
Indian farms having 6 Murrah buffaloes,
produced 1,437 kg ECM for the
accounting period that was much lower
than the production records of Pakistani
Nili-Ravi buffaloes (Saha et al. 2004).
Production on all farms was round the year and
no seasonal trends were observed.
Farm Land Use
Total farm area averaged 7 hectares; land
renting trends were not very high and only
touched 0.21 hectares per farm (Figure 2).
However, the area being used for forage
production was 2 hectare. All the land was
arable and no permanent or temporary
grasslands were available.
Stocking rate was fairly higher (10 buffaloes per
hectare) and land productivity averaged 26,265
86%
8% 6%
Figure 1: Milk Disposal trend at Buffalo
farms (%)
Marketed Milk Used at Farm Wastages
97%
3%
Figure 2: Land Ownership (%)
Self Rented
3
kg ECM per hectare (Figure 3). Working paper on Pakistan’s small producers supports our
findings; stocking rate remained 9 to 13 units per hectare. But the milk production was reported
to be 15,495 kg ECM per hectare (Garcia et al. 2003). The higher values in present study might
be due to the latest advances in agronomic practices and modern feeding trends.
Dairy farms in Bangladesh were found
with similar trends of not renting lands
for agricultural systems while, per farm
area ranged between 0.40-1.44 hectares.
The stocking rate in Bangla farms was as
high as 14 animals per hectare and
production in rural dairy farms was
recorded to be 25,454 kg ECM per
hectare (Hemme et al. 2004). Indian
farms in Orissa showed a trend of using
up to 0.23 hectare of land for dairy
production with a stocking rate of 6 units
per hectare. Milk production was found
to be 7,709 kg ECM per hectare (Saha et
al. 2004); this lower production as
compared to Pakistan might be due to
genetic differences in the dairy animals
of respective countries.
General Management Outlook
Herd Management
Regional studies indicate that calves at typical buffalo farms are still a secondary product and
poor management practices often not only lead to higher mortality but also affect their growth
rate.
India and Bangladesh have a culling rate between 10-30% and 15-25%, respectively. Whereas,
calf loss of 20% (Saha et al. 2004) clearly indicates the real story behind. Delayed puberty, poor
conception rate and higher age of parturition are direct result of poor feeding practices.
Table 1 Selected herd indicators on dairy farms in Pakistan
Herd indicators
Age at first calving Months 37
Calving interval Days 443
Culling rate % 6.6
Lifetime yield Kgs per culled-cow 17,287
Calf loss % 9
Milking Frequency Times per day 2
2
5
10
0
1
2
3
4
5
6
7
8
9
10
Land Use (ha)
Figure 3: Land Use
Fodder Use Crop Use Stocking Rate
4
The reason for differences from earlier studies in culling might be due to the level of study as the
present study was conducted on medium size farms where commercial trends were evident,
hence; better care of calves leading to long productive life of buffaloes was observed.
Feeding
Buffaloes all over the subcontinent are kept under poor feeding conditions. They are fed
roughages and occasionally concentrate (Table 2).
Table 2 Buffalo feeding observation
Parameters Units Observation
Feeding on grazing at
pastures
Hectares No pastures
Concentrate feeding Kgs per day 3.3
Milk from concentrate Kg ECM per Kg of
concentrate
2.2
Fodder mixed with wheat straw was offered and as concentrate source, cotton seed cake was
commonly used. Similarly in India, grasses with paddy straw were found commonly used for fill
effect and rice broken, gram kernel and rice bran were commonly being used as concentrate
(Saha et al. 2004). Bangladesh farms showed similar trends to India as paddy and its byproducts
were commonly available for feeding (Hemme et al. 2004)
Capital Investment Analysis
The investment in different segments was
different. However, a general situation observed
is given as under, to harmonize results, costs
have been calculated in terms of € per cow
(Figure 4). Livestock investment was primary
and major cost, observed. Whereas, building
costs were very low, essentially translating into
the fact that poor housing management and open
yards were used for livestock keeping. Similarly,
no significant investment on milking machines
and other equipment was done.
Contrary to the situation, Capital input reached
to 5,291€ per cow in European farms (Wille et
al. 2009). Differences were due to the
mechanization and improved farming in
European farms versus traditionally maintained
low investment farms in Punjab, Pakistan. A
122
828
87
244
Euros/Cow
Figure 4: Capital Cost
Machinery Livestock Building Others
9%
65%
7%
19%
Figure 5: Capital Investment Share
Machinery Livestock Building Others
5
percentage of capital utilization is shown in Figure 5.
Operating Expense Analysis Costs at dairy farms may be divided into 2 distinct groups, direct costs (involving expenses
directly on dairy animals) and indirect costs (labor, machinery, building, depreciation and
miscellaneous costs).
Table 3 Dairy farms Expenditure
Type of Costs € per100kg ECM
Purchase of animals 3.455
Animal health, hoof trimming 0.422
Insemination, ET 0.117
Other direct costs of animal production 2.524
Seeds 0.985
Fertilizer 3.684
Pesticides 0.732
Other direct costs of fodder production 0.330
Total direct costs 12.249
Personnel expenses 5.434
Calculated cost for family labour 0.001
Contract work, leasing of machinery 1.485
Fuel, lubricants 0.922
Energy 0.127
Depreciation of machinery and vehicles 0.250
Opportunity costs for machinery and vehicles 0.191
Total labor related costs 8.410
Depreciation of buildings and installations 0.176
Opportunity costs for buildings and installations 0.143
Total costs for buildings 0.319
Renting land 0.196
Opportunity costs for land 2.893
Taxes and fees related to land -
Total costs for land 3.089
Other costs 0.066
Total of costs 24.134
6
Amongst all aforementioned costs, cash costs
remained at the highest followed by the
opportunity cost and the depreciation cost
respectively. Reasons of low in depreciation
cost are the lesser capital input in terms of
machinery and buildings (Figure 6).
Total costs in European farms remained 41.5
€ per100 kg ECM (Wille et al. 2009) and
was higher in all cost components due to
advanced farming systems.
Entrepreneurial Returns
Milk remains the major income source of
farms with average farm income of 44.6 €
per 100Kg ECM. Other inflow calculated included the animal returns, income from renting
assets to nearby farms and others. The milk
returns were capped at 37.91 € per 100 kg
ECM (Figure 7).
Consequently, in 2008-09 some 20.47 €
per100 Kg ECM was being earned by most
dairy buffalo farmers in Pakistan.
Current Situation, Challenges &
Future Options
The Milk price has been declining for the
last 4 years in Pakistan (Figure 8). Year
2011-12 was relatively better in terms of
price offering with average of around 0.36
€/Liter. The major reasons were cheaper
production of SMP and its import from
neighboring countries like India.
78%
20%
2%
Figure 6: Operating Cost Share (%)
Cash Opportunity Depreciation
85%
4%
2% 9%
Figure 7: Returns Structure (%)
Milk Animal Sales Renting Assets Others
7
Input costs ranging from direct, indirect and opportunity have gone higher. Animal feeds
(generally covering 70% of operating expense) take corn as a major ingredient and its price is
a general indicator of overall feed costs. The corn prices have gone as much as double over
the year 2009-2013 (Figure 9).
Above situation is alarming as no significant improvement has been observed in milk
production potential and farming trends but the prices have doubled in the meantime with a
noticeable decrease in milk price. Presently, the farming community is operating at minimal
profit margin and may fall prey to the negative margins.
A good factor is that capital investment and non-operational costs in Pakistan are relatively
low, compared to contemporary industries of other regions. On the other hand lower
production per animal is the most serious concern and needs to be addressed by better
utilization of feed resources and adoption of improved husbandry practices.
-
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Figure 8: Milk Price Trend
2010-11 2011-12 2012-13 2013-14
0
50
100
150
200
250
0
5000
10000
15000
20000
25000
30000
1 2 3 4 5
Figure 9: Corn Prices (2009-2013)
Euro/MT PKR/MT
9
References
Afzal, M., 2006. Investment opportunities in livestock sector in Pakistan. The News.
Bilal, M. & Ahmed, A., 2004.Dairy hygiene and disease prevention, Usman and Bilal Printing
Linkers Faisalabad, Pakistan.
Bilal, M. &Hameed, A., 2009.Survey of buffalo management practices at farmers' level.In 6th
Asian Buffalo Congress. Lahore, Pakistan.
Cain, P., Anwar, M. &Rawlinson, P., 2007.Assessing the critical factors affecting the viability of
small-scale dairy farms in the Punjab region of Pakistan to inform agricultural extension
programmes. Agri. Sys, 94(2), 320-330.
FAO, 2010.A summary of milk production across the world, FAO.
Garcia, O., Mahmood, K. &Hemme, T., 2003.A review of milk production in Pakistan with
particular emphasis on small scale producers, FAO.
Hemme, T., Garcia, O. & Khan, A., 2004.A review of milk production in Bangladesh with
particular emphasis on small scale producers, FAO.
Ministry of Finance, 2009.Pakistan economic survey 2009-10. Available at: http: per
perwww.finance.gov.pk persurvey_0910.html [Accessed February 15, 2011].
Saha, A., Garcia, O. &Hemme, T., 2004.The economics of milk production in orrisa, India, with particular emphasis on small scale producers, FAO.
Sarwar, M. et al., 2002.Dairy industry in Pakistan, a scenario.Int. Journal of Agri. and Bio., 4(3),
420-428.
Wille, S. et al., 2009.EDF report 2009, Germany: European Dairy Farmers.