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: shakeelamjid@gmail.com 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

8

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.