2013

Feasibility Report of
50 dairy animals
11-arid-973
11-arid-949
11-arid-950
11-arid-951
11-arid-953

Submitted to:
Dr Fiaz Ahmed
12/31/2013
 CONTENTS
1. Introduction
2. Brief description of project and products
2.1. Critical factor
2.2. Installed and operational capacities
2.3. Geographical potential for investment
2.4. Potential target and market
2.5. Project Economics
3. Project cost
3.1. Capital cost
3.1.1. Building cost
3.1.2. Equipment cost
3.2. Running cost or Operational cost
3.2.1. Feed cost
3.2.2. Land Rent
3.2.3. Maintenance
3.2.4. Building Depreciation cost
3.2.5 Equipment and machine disprisiation
3.2.5. Equipment and machines maintenance cost
3.2.6. Human Resources / Labor cost
3.2.7. Vaccination and medication cost
4. Income or Revenue Generation
4.1. Milk sale
4.2. Calf sale
4.3. FYM sale
5. Conclusion
6. Literature cited
 1. INTRODUCTION

A dairy farm with a herd of 50 animals (25 cows and 25 buffaloes) needs a total investment
estimated at Rs. 18.322 million out of which the capital cost of the project is Rs.13.08 million for
animal purchase and building construction. The rest is used to meet the working capital
requirement. The project is expected to achieve revenue of Rs. 6.283 million in the first year
with projected IRR and Payback of project being 30% and 20 years respectively. The farm will
provide employment opportunity to 6 individuals other than the owner /manager.

2. BRIEF DESCRIPTION OF PROJECT & PRODUCT

A dairy farm is proposed to be established on a rented land, with a constructed structure having
total area of 9000 sq.ft. The proposed model involves 50 animals (25 cows and 25 buffaloes) to
achieve milk production of 91500 liters by the end of first year. Milk will be primarily sold to
bulk buyers at the rate of Rs.60 per liter with an annual price increase of 10%. However, the
farm will also offer sale to domestic individual consumers.

2.1 CRITICAL FACTORS:

1-Background knowledge and related experience of the entrepreneur in dairy farm operations

2-Application of good husbandry practices such as;

 Selection of dairy breed: good local dairy buffalo breeds namely Nili-Ravi and Kundi and
cattle breeds such as Sahiwal, Red Sindhi, Tharparkar and Cholistani. Crossbred cattle
may also be considered as crossbreeding is recommended for non-descript cattle with
semen of local high producing breeds like Sahiwal, Cholistani, Red Sindhi etc. or exotic
breeds like Holstein Friesian, Jersey etc.
 Selection of good dairy animals with excellent body condition and udder health: average
daily milk production of 10 liters or above for buffaloes and 12 liters or above for cows
in 2nd or 3rd lactation, essentially with no disease history.
 Housing should be dry, comfortable and airy with proper drainage of dung, urine and
waste material.
 Feeding: Animal should be fed 1 kg of concentrate feed per 3 liters of milk are produced,
hence animal with 10 liters of milk production would be offered 3-3.5 kg of concentrate.
Additionally, urea molasses blocks and salt blocks can help in better milk production.
 Watering: Supply of clean drinking water in clean troughs i.e. 50 to 80 liters of water
consumption/animal/day round the clock maintains the milk production capacity of the
animal.
 Breeding: Efficient and timely Artificial Insemination (AI) of good genetic worth is a key
to success in good breeding programs of herd.
  Disease management: Hygienic and clean milking twice a day (morning/ evening) lowers
the chances of mastitis as udder health and hygiene is most important in dairy animals.
 Follow the Female calf care and heifer management as it is very important in maintaining
dairy farm production. Recommended vaccination schedule especially for Foot and
Mouth Disease.
 Selection of good productive animals and culling of uneconomical animal.
 Record keeping for milk production, calving, AI, vaccination etc.
 Proper storage of milk preferably at temperature of 4ºC and transported at 11ºC
temperatures

2.3 INSTALLED & OPERATIONAL CAPACITIES

Production capacity is based on project size. The Pre-feasibility study suggests an initial herd
size of twelve (50) animals which is economical to justify the overhead cost. Initially, herd mix
of 50% cows and 50% buffaloes is recommended to obtain maximum milk production round the
year. The dairy farm will have the capacity to produce 91,500 liters of milk per annum.

2.4 GEOGRAPHICAL POTENTIAL FOR INVESTMENT

Dairy farm is a viable business proposition for both rural and peri-urban areas of Pakistan. There
is almost equal demand for milk in both developed and semi developed cities across the country,
hence, from the demand point of view the said project offers good investment opportunities for
small scale investment in al provinces of country.

2.4.1. POTENTIAL TARGET MARKETS

Domestic consumers, milk processors, dairy companies, milk collection companies and
contractors are the major clients of dairy farms.

2.5 Project Economics

All the figures in the financial model have been calculated for 12 dairy animals consisting of
cows and buffalos in equal proportion. The following table shows internal rates of return and
payback period;

Description Details
Internal Rate of Return (IRR) 34.28%
Payback Period (Year) 20
NPV 125,650,000

Returns on the scheme and its profitability are highly dependent on the efficiency of above
mentioned critical factors. In case dairy farm project is not able to attain its target milk
production or implement effective husbandry practices, it will not be able to cover the potential
market and recover payments; hence, cost of operating the business will increase.

3. Project Cost
For our convenience we divide the cost into two parts;

 Capital cost
 Running cost

3.1. Capital Cost

Following operational requirements have been identified for the proposed business.

Table 3: Capital Investment for the Project

Capital Investment Amount (Rs)

Building/ Infrastructure 4,946,500

Cows and Buffalos 6,375,000
Machinery and Equipment 1,758,000
Total Capital Cost 13,079,500
Cash in hand
Total Project Cost

3.1.1. Space Requirement and Housing cost

The area has been calculated on the basis of space requirement for shed area, open paddock,
servant rooms and stores. Following table shows calculations for project space requirement;

Table 4: Space Requirement

Description Area sq. ft.

Shed for cows 1000
Open paddock for cows 2000
Shed for buffalos 1000
Open paddock for buffalos 2000
Stores for fodder,concentrate and machine 200
Utensils and milk storage room 200
Servant room, wash room 100
Silage bunker
Calf shed 750
Open area for calf 1500
Total 8750
Total investment in building and infrastructure is calculated to be approximately Rs 4,946,500

3.1.2 Machinery and Equipment

Following table provides list of machinery and equipment required for the proposed dairy farm:

Table 5: List of Machinery and Equipment

Description Unit rate (Rs.) Quantity Cost (Rs)

Tractor trolley 900000 1 900,000
Tube well 200000 1 200,000
Chaff cutter 40000 1 40,000
Forage cutter 250,000 1 250,000
Bull cart 160,00 1 16,000
Calf Feeder 1,200 10 120,00
Teat Dip Cup 350 10 3,500
Water Pump 20,000 1 20,000
Freezer 22,000 1 22,000
Total 1,463,500
In addition to above, other equipment, such as fodder cutter, water pump and some buckets etc.
are required.

3.2Running cost
3.2.1 Feed cost

Following tables show raw material requirement to run the proposed dairy farm;

Table 6: Feeding Requirements for Cows

Description Kgs per animal per Rs per Kg Amount (Rs.)

day
Forage 40 2 80
Silage 25 6 150
Concentrate 4.62 35 161.70
Total 391.70

Table 7: Feeding Requirements for Buffaloes

Description Kgs per animal per Rs per Kg Amount (Rs.)

day
Forage 40 2 80
Silage 25 6 150
Concentrate 5 35 175
Total 405
3.2.2. Rent Cost:

Land required for 50 animals is about 16 acre and per acre rent is approximately 15,000

Rent per year = 240,000

3.2.3. Building Depreciation:

It is about 5% of total Building cost

Building depreciation cost: 2,47,325

3.2.4 Equipment and Machinery Depreciation:

It is 10% of total cost = 637,500

3.2.5 Maintenance cost:

@ 2% of housing cost = 127,500

3.2.6. Maintenance of equipment:

@ 3% of equipment cost =52,740

3.2.7. Human Resource Requirement

6 milkmen will be required for milking and taking care of animals, whereas owner / manager
will look after the overall business operations.

Cost of Human resources = 768,000

3.2.8. Vaccination /medication

3000 per animal is required for vaccination and medication so total cost is about 150,000

Total running cost =5,242,365

4. Revenue Generation /Income

Table 8: Revenue Generation

Description Units Annual Rate Annual

Production (Rs/Unit) Revenue (Rs)
Milk Sales Litters 91,500 60 5,490,000
Calf Sales 25 25000 625,000
FYM Trolley (50mons) 67 Trolleys 2500 167,500
Total Revenue 6282500
 5. Conclusion:
Profit from the above feasibility is 1,057,635 annually. This can be increased by different
strategies .If we have our own land for harvesting the fodders . Secondly, if we avoid middle
man or have own enterprises for sale of Milk and Beef or sale our goods through auction.

6. Literature cited
 www.smeda.org.pk
 www.parc.com.pk