Dairy Economics Survey

REPORT

August 2008

Presented By Dr. Hamid Jalil

Director Planning & Evaluation Cell

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TABLE OF CONTENTS
Sr. # 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Contents Executive Summary Introduction Aim of Study Methodology Source of Milk Production Average Unit Productivity Cost of Milk Production Milk Supply Channels; Cost and Sale Salve Value of Milk Management Practices Milk By-Products Major Findings Recommendations References Page # 03 04 10 11 12 14 16 17 18 19 25 28 30 31

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Executive Summary
Pakistan has larger base of dairy sector allied with the agriculture. Dairy sector generates employment and business opportunities, particularly in the rural and peri-urban areas. Numbers of people in urban areas are also involved in dairy based business and earn revenues. The public sector departments hold primary responsibility to guide the farmers and play their significant role in dairy sector development. The research based decisions of policy makers will have real impact on welfare of farmers and progress of all the stakeholders of this sector.

This research is commissioned by Planning & Evaluation Department, L&DD, and Govt. of the Punjab. The study aims at investigating the market structure, sources of milk production, average unit productivity, sale value of milk and cost of production in periurban areas of Lahore. The research also explores sale, cost, production and quantity of by-products of milk purchased by milk centers of urban areas of Lahore. All the data is collected on semi-structured questionnaire through interviews of 120 farmers and 60 milk centers of Lahore.

This survey brings forward the valued findings, which may help the planning departments, key stakeholders, policy makers and other associated to take effective decisions in the development of dairy industry. The proportion of small milk producers is quite high, which hinders the economies of scale and profitability in the dairy industry. 82% milk is contributed by buffaloes with averagely 18 buffaloes with one former, while 4 cows are averagely owned by one farmer with 18% share in the milk industry. Maximum buffaloes are 85 and cows are 35 with a farmer. Average milk production of farmer is 120 liters. Further segregation reveals that 63% farmer produce 48 liters, 21% produce 135 liters, 11% produce 295 liters and 5% produce 592 liters on average daily. The buffaloes and cows have insignificant difference in quantity of milk on average daily. Large numbers of small farmers need to be given extensive training in the area of marketing, management and supply chain. Farmers need to be taught scientific method of feeding, fed combinations and other measure to raise milk production. 3

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Introduction
Agriculture accounts for 20.9% of the total GDP and employs 43.4% of the total workforce in Pakistan. With an almost more than 50% contribution, livestock is by far the most important sub-sector. The share of agricultural growth has jumped from 25.3 percent in 1996 to 49.6 percent in 2006(Livestock census, 2006) and it contributes almost 52 % of Agriculture GDP (Economic Survey, 2007-2008). Within the livestock sector milk is the largest and single most important commodity.

The countrys production base is highly fragmented and dairy enterprise is dominated by the private sector, with the government playing a regulatory role. According to the Livestock Census held in 2006, among the 8.4 million reported dairying households, 51% own a herd size of just 1-4 animals. Another 28% households maintain herd sizes of 5 to 10 animals, whereas, only 14.23% of the herd sizes are composed of 11 to 50 animals. Only 6.72% of the farms in the country come under the large category where more than 50 animals are kept. Approximately, 80% of the milk is produced in rural areas, with peri-urban and urban areas accounting for another 15% and 5%, respectively (Livestock census, 2006). Only 3-5% of total production in the country is marketed through formal channels. The remaining 97% is produced and marketed in raw form by informal agents in the marketing chain portion of the milk producers.

To ensure development of the countrys dairy sector, it is important that critical support is provided to the promotion of smallholder producers in peri-urban areas. Key issues for promoting smallholder based dairy development would be to organize farmers, integrate production with marketing, enhance access to credit, upgrade milk marketing chains through adoption of modern technology, enhance market information, and

improve farm profitability.

Despite decades of oversight by the government, Pakistan is the fifth largest milk producer in the world. According to the Pakistan Livestock Census held in 2006 overall,

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milk production increased by 35.6 percent since 1996. Buffaloes and cows are major milk producing animals. According to a study on Milk Marketing conducted by FAO in Pakistan in 2003, 80% of the milk in the country is collectively produced by rural commercial and rural subsistence producers. The peri urban producers account for 15% of the milk production, whereas urban producers contribute 5% to the total milk production in the country (FAO, 2003) Pakistan's dairy industry is plagued by a number of problems which include lack of commercial dairy farms, low productivity due to poor nutrition, a weak infrastructure, lack of financial facilities, and the ready availability of raw milk to a poor and uneducated population. Although Pakistan was ranked fourth among the five leading milk producing countries in the world, with an estimated 24 million animals having produced closely to 28 million tons of milk in year 2003 and over 31 million tons during 2005-06 as the 5th largest producer of milk in the world, its yield per animal is only one-fifth of that of Western Europe.

Supply and Demand of Milk As a food item, all milk (both milk and milk equivalents) is second only to cereals in level of per capita consumption in Pakistan. The annual per capita consumption level at the national level is 190 liters. Province wise, per capita consumption stands at 246 Kg in Sindh, 132 Kg in Punjab, 86 Kg in NWFP, and 108 Kg in Baluchistan.

Due to rising inflation and high poverty levels, the majority of Pakistani consumers are price conscious. Therefore, demand for open, raw milk is high compared to processed milk. Hence, raw milk is the primary dairy product marketed in the country. Over 90 percent of the marketed milk is collected and marketed unprocessed through the informal market by a multi tiered layer of marketing agents. The supply of milk to meet domestic demand has usually lagged. To meet this gap, powdered milk is imported every year. During July 2006 to November 2007, dairy products worth Rs. 2320.42 million ($38.6 million) were imported (Economics Survey, 2005-06)

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Peri-Urban Commercial Farming and Marketing Chain: In this system, the animal husbandrists (gowalas) who have settled in the outskirts of the cities, they own herds numbering up to 20 milk animals and have found capacious market for milk in urban areas.

An estimated 9 to 12 million liters of milk every year are consumed by the urban consumers in Pakistan. To satisfy some of this urban demand, milk is produced in urban and peri-urban areas of the country, accounting for 5% and 15% of the total milk production, respectively. Since this milk is not sufficient to meet the entire urban demand, the deficit is met by rural producers. These are usually owned by market oriented farmers and, owing to the scale of their operations, can be classified into two general groups. Most of the farmers operate on relatively small scales by keeping 10 to 50 dairy animals. On the other hand, larger farmers usually keep up to 500 livestock heads. This later category of farm can be either owned or operated by a progressive farmer individually or it can be a part of the peri-urban cattle colonies that have been established on the outskirts of major cities.

In the Urban Milk Marketing Chain, the producer has relatively more control over the supply chain as the consumer is easily accessible and is also willing to pay a high price for milk. Hence, in many instances, farmers in the Urban. Milk Marketing Chain integrate production and marketing functions in their operations and instead of relying on a middleman, the milk is directly sold by the farmer. Powdered milk, butter, cream and lassi etc. However, UHT milk is the most predominant form of product produced by these plants.

Ali and Saifullah (2006) findings reveal that the milk production is labour-intensive. There are a number of biological, technical and socio-economic constraints like the

shortage of feed, high mortality rate, poor genetic potential, high input cost and scarcity of sources and inadequate marketing system. All these render this sector undeveloped and in a miserable condition.

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Milk is transported through pick-ups, public transport and motorcycles for long distances and bicycle and horse or donkey carts for short distances. Poor road linkages between rural and urban areas do not allow producers to transport milk to distant markets due to its perishable nature.

Lack of quality check is the most neglected aspect of the whole system. There is no test at any stage along the marketing chain. For example, those who handle milk right from the beginning till it reaches the final consumer are not conscious of hygiene. Many shops in urban areas are exposed to dust and flies. Very few shops have refrigeration facility; the milk is of poor quality. The containers used in transportation are unhygienic since it is a difficult to clean them. The milk adulteration is another serious concern in peri-urban milk supply chain.

The sale and purchase of milk is done directly. But in some cases commission agents also negotiate the prices. They bargain with the seller to reduce the price while negotiating with the purchaser higher rates.

Milk in urban areas is accessible to common consumers in two ways: loose, unprocessed milk and packed, processed milk. Each has its own price regime.

The unprocessed milk passes through the middle persons before it reaches the urban retailer. The price of milk increases by one rupee per liter at every stage of sale. The 'Dodhis (Gawalas) generally have undocumented contracts with farmers for regular milk supply. Some 'dodhis' have milk storage and chilling system and transport system. Transportation generally costs Rs.0.50 to Rs.1.0 per liter. The urban retailers deliver milk door to door, by motorbike or sell it in a shop to consumers. (Tanvir, 2006)

Burki et al (2005) provide a preliminary assessment of the state of Pakistans dairy, explore the sectors potential in making impact on the dairy economy, and recommend areas where more detailed research work is needed. Further research on production

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structure in dairying, according to the authors, could enable to understand the structural changes needed in this sector.

Milk production and marketing in Pakistan is exclusively dominated by the informal private sector, consisting of various agents, each performing a specialized role at the relative node in the supply chain. These consist of producers, collectors, middlemen, processors, traders, and consumers. Only 3-5% of total production in the country is marketed through formal channels. The remaining 97% is produced and marketed in raw form by informal agents in the marketing chain. To get a comprehensive understanding of the opportunities and problems associated with the dairy enterprise in Pakistan, it would be important to give here an overview of the role being played by both the informal and formal channels.

Waynn et al (2006) Milk sales from the peri-urban sector are mostly sold direct to households and it is un-pasteurized and is not chilled. The distribution system is based around milk collectors operating as individuals or contracted groups distributing milk from a major producer. There are fundamental issues of food safety that must be addressed in this component of the marketing system: food safety regulations and hygiene standards are major areas of government policy intervention because of public health considerations; and reforms to existing regulations and effective compliance are neglected areas of government intervention.

Milk sales by the commercial sector are small and mostly involve UHT milk. There is some emergence of a market for fresh milk. The development of a commercial milk marketing system has been constrained by limited milk supplies available for collection. The integrity of the milk collection system in terms of hygiene and chilling a highly perishable commodity has also limited the development of this sector. In Punjab, the commercial sector is investing in the development of a farm to factory cold chain distribution system.

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Milk and milk By-products processing and marketing In Pakistan only 3-4% of the total milk is processed and marketed through formal channels whereas the remaining 97% of the milk reaches end users for immediate consumption through an extensive, multi-layered distribution system of middlemen. However the processed milk consumption is growing at the rate of 20% per year. Pasteurized and UHT milk in tetra packs are very popular products (PISDA-USAID, 2006). Most milk shops and bakeries across Pakistan manufacture and sell traditional dairy products like Dahi (Yogurt) and Khoya (Condensed milk sweet).

Large dairy shops also produce Desi ghee and butter. Processing plants have also introduced a number of dairy products like yogurt, drinking yogurt, flavored milk, cream, butter, ghee, cheese, ice cream etc. The quantities sold however are small except for yogurt & butter. Industrial processing units in addition to the traditional traders of sweetmeats, milk, yogurt, ghee and other dairy products have been set-up. Most of processing capacity is concentrated near larger markets and away from potential sources of milk.

The less development of dairy sector is caused by lack of adequate planning, improper management of distribution facilities, less trained human resource and poor medical facilities. It is significant to study the behavior of dairy industry and investigate the actual problems of the stakeholders. Huge investments in dairy sector projects make invalid impact due to lack relevancy and research based decisions. This study is commissioned by planning and evaluation department, L&DD Govt. of Punjab, to make appropriate planning and initiate relevant and fact based decisions.

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Aim of Study:
The study aims at surveying the farmers of peri-urban areas and milk centers in urban areas of Lahore. The study tries to investigate in the following areas:

Source of Milk Production Average unit productivity Cost of Milk Production Milk Supply Channels Management practices in peri-urban areas By Products of Milk

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Methodology
The study attempts to investigate different variables of interest related to dairy industry. The Lahore is selected as sample to study the research issues and collect data through self-constructed research questionnaire. The variables are primarily extracted from manuscript of focus group discussion, held in livestock departments. All the stakeholders and active players of dairy industry share their observations and experiences based on objectives set by study sponsor. The questionnaire was further validated by pilot testing of 15 respondents and number of errors regarding language, structure, and flow and scale options were removed. 120 owners/ managers of dairy farms and 60 milk shops/collection centre were interviewed by professional surveyors based on system sampling. Quality of survey was ensured through 10% back checking. All the data is analyzed on statistical software. SPSS and results are produced for interpretation.

Target Areas: The sample has been collected from peri-urban areas of Lahore. It includes two major cattle colonies of Lahore including Harbanspura and Rakhchandra. Other areas where animal population is significant includes Thokar Niaz Baig, Kamahn pind, Bund Raod, Chungi amar sidhu and Shadara town.

The number of dairy farms visited for sample collection depends on number of animals. There was random sampling and farms from different areas. The number of dairy farms visited from different areas is: Harbanspura Rakhchandra Thokar Niaz Baig Kamahn pind Bund Raod Chungi amar sidhu Shadara town : : : : : : : 30 40 13 12 8 8 9

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Sources of Milk Production

This section of report documents the details of various sources of milk production. It addresses the issues like quantity of total milk production, production division by animals and farmers, production brackets according quantity and associated variables. The analysis is produced from the views of sampled farmers, taken on self-structured study questionnaire. Milk Production Brackets and Farmers Production Brackets (in liters) Up to 100 100 to 200 200 to 400 400 and above Total No of Farmers 76 25 13 6 120 Percent 63 21 11 5 100

The classification of farmers into various brackets, based on quantity of produced milk, gives significant insights of the dairy industry profile. The statistics show that majority of farmers (63%) produce up to 100 liters milk daily, followed by 21% farmers, who produce 100 to 200 liters milk daily. The larger quantity of milk production is covered by very small proportion of dairy industry, as 11% produce 200 to 400 and 5% produce more that 400 liters of milk daily. Milk Production of Animals and Average Unit Productivity Average Animal (Per Maximum share farmer ) 14387 120 1020 Total 11803 2587 2132 468 98 22 18 4 82% 18% 11.8 liters 11.6 liters 1000 240 85 35

Category Total Milk Production Milk from Buffaloes Milk form Cows Number of Buffaloes Number of Cows

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As per the sample of survey, averagely 120 liters of milk are produced by a farmer of peri-urban areas of Lahore. The maximum limit of a farmer is 1020 liters of milk as shown in the data of this survey. Buffaloes produce line share (98 liters averagely in a farm), which constitutes 82% of the dairy market. Cows contribute 18% of the milk of dairy industry; 22 liters averagely in a farm. Interestingly, population of buffaloes is quite larger as averagely 18 buffaloes in a farm as compared to cows, which are 4 in a farm. Maximum numbers of buffaloes in a farm are 85 and cows are 35 in the peri-urban areas of Lahore.

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Average Unit Productivity

The average unit productivity of buffaloes stands at 11.8 liters per day. The milking cows also got average unit productivity around 11.6 liters per day, quite similar to the buffaloes. The productivity per unit seems negatively affected by the time period of survey, as the season around May and June yields minimum milk of the animals.

Milk Production across the Production Brackets Production Brackets Up to 100 liters N=76 (63%) 100 to 200 liters N=25 (21%) 200 to 400 liters N=13 (11%) Average (per farmer) Bracket production Bracket share Average(per farmer) Bracket production Bracket share Average(per farmer) Bracket production Bracket share Average(per farmer) Bracket production Bracket share Average(per farmer) Share in total Total Sum From Cows 9.2 700 27.10% 28 691 26.70% 53 686 26.50% 85 510 19.70% 22 100% 2587 From Total Buffaloes Production 38 2921 24.70% 108 2688 22.80% 243 3154 26.70% 507 3040 25.80% 98 100% 11803 48 3621 25.20% 135 3376 23.50% 295 3840 26.70% 592 3550 24.70% 120 100% 14387

400 and above N=6 (5%)

Total (all brackets)

The production of milk across the different production brackets gives very fruitful insights. Each bracket has different statistics of production. The production bracket of up to 100 liters covers 63% of dairy industry but contribute 25% of total milk share. The

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average production of farmer is 48 liters per day, contributed 38 liters by buffaloes and 10 liters by cows. The second bracket of 100 to 200 liters production stands 21% of dairy industry, but contributes 23% of total milk production. In this bracket, a farmer averagely supplies 195 liters a day, shared 108 liters by buffaloes and 28 liters by cows. Almost 11% farmers fall in third bracket, where 27% of milk in dairy industry. Average framer in

This bracket supplies 296 liters a day, consists of 243 liters from buffaloes and 53% liters from cows. In fourth bracket (5%), the framers averagely supplies 592 liters of milk a day making 25 share in total milk production. The average total production is contributed by buffaloes 507 liters and by cows, 53 liters a day. All the production brackets have different averages of daily milk production, but interestingly, contribute in almost similar input/output ratio. The findings of pervious tables are again confirmed that cows are less in numbers and milk quantity, but milk production capacity is almost equal to buffaloes. Dairy industry observes good market equilibrium and not concentrated too few larger suppliers. The farmer having more that 400 animal are few in number, while people of less than 100 milking animals are quite large in numbers, which equate their total share of milk production in dairy industry.

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Cost of Milk Production

Spending Family Labor Feed Vaccination Medicine/Drugs Utility bills Transportation Total spending in sample Average (monthly) 4204 87176 531 1068 1678 3561 16370 Total 504500 10461160 62677 128205 199650 423810 11780002 Average (Daily) 140 2906 18 36 56 119 3274

The expenses on milk production give valued figures for the strategic planners of dairy industry. The statistics of sampled farmers indicates that farmers spend daily average of Rs. 140 on family labor, Rs.2906 on animal feed, Rs. 18 on vaccination and Rs.36 on medicine/drugs and Rs.56 on utility bills.

The average cost of production per liter of milk in peri-urban areas of Lahore is Rs. 30 per litre but most of the time this cost boost up to Rs. 38 per liter due to mismanagement of non lactating animals and poor management practices including shortage of labor, feed, morbidity and mortality of high yield animals. It results into hefty profit losses and results into demotivation of stakeholders especially dairy farmers. It pushes farmers in unethical practices like adulteration of milk for compensating their losses. Almost 23% farmers reveal insignificant expanses of medicine having less than 21 buffaloes and 06 cows. The farmers make expense of Rs. 1678 on utilities bills and Rs. 3561 on transportation of the milk on average. Almost 29% farmers, having less than 14 buffaloes and less than 3 cows, use their on transportation facilities, which incur insignificant extra cost. The results report the highest spending on feed, followed by labor, transportation, utilities and medicine. The vaccination ranked the lowest in priority list of farmers spending.

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Milk Supply Channels; Cost and Sale

Milk sale across supply channels Channels Halwai/collection centre N=26 (22%) Dodhi /Gawalas N=87 (72%) Others N=7 (6%) Total(N=120) Total 1881 11252 1254 14387 % of Total 13.20% 78.20% 8.60% 100.00%

The distribution of milk to different channels of supply indicate market portfolio of diary industry. According survey statistics of sample, almost 13.20% of milk production goes to Halwai/collection centre, 78.20% to Dodhi/Gwalas, 8.60% is soled to others sources without any clear specification. There is large number of farmers (72%) of total sample sale milk to Dodhi/Gawalas. It includes the farmers who sell milk by themselves and act as Dodhi/Gawalas. Most of them reside in major cattle colonies of Peri-urban areas of Lahore. It constitutes major percentage of total milk sold in peri-urban areas. Next to this category, there are Halwai/milk shops that purchased milk directly from farmers. It constitutes 22% of total sample size. Almost 6% of farmers sold milk to other sources which are unknown in sample of dairy farmers. It may be assumed that this milk may be used at home for personal use for production of milk by-products.

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SALE VALUE OF MILK

Channels Halwai N=26 (22%) Dodhi /Gawalas N=87 (72%) Others N=7 (6%) Total(N=120) Total 1881 11252 1254 14387 % of Total 13.20% 78.20% 8.60% 100.00% Sale Value (Rs.) 28 32 Sold to end consumers (Rs.) 32 35 Profit per liter(Rs.) 4 3 -

The analysis of cost and revenue in dairy industry gives quite alarming statistics. The above statistics show their insignificant profitability per day as only supply expenses are excluded from average daily revenue. If other types of cost of production are included, the profit must go into negative. The sale value of milk by dairy farmers to Dodhi/Gawalas is Rs.32 per liter. These prices are regulated by Government and dairy farmers community in Harbanspura and Rakhchanadra cattle colonies. This milk when sold by Dodhi/Gawalas it cost Rs.35 to end consumer. But it is not true story when we conducted focused group with end consumers. The milk sold to civic population of Lahore is at different tiers. The price of milk depends on the quantity of water alongwith adulterants in it. The milk sold by same Dodhi/Gawalas to same consumer at to different prices. If it is pure it cost Rs.40 to consumer and if consumer needed adulterated milk with water it cost may be Rs. 28 or sometimes even less than Rs.28. The variety of milk adulterants has been added which are changes and become worst day by day due to resistant milk collection centre and food inspection departments. The profit margins to different milk supply channels are very less and insignificant if milk has been sold unadulterated. It has been concluded that if pure milk has been sold to civic population of Lahore, it is not possible to meet the demand of raw and unprocessed milk in Lahore. It means that lot of malpractices are going on in Supply of milk to Lahore to create balance between supply and demand of milk. So the the peri-urban areas of Lahore are unable to meet the pure and hygienic supply of milk to civic population of Lahore. It does not seem commercially viable and need huge planning and development by L&DD, Govt. of the Punjab. 18

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Management Practices
Feeding: Feeding is one of the major management practices in milk production and it contributes much in cost of milk production. Feeding practices is quite mismanaged in peri-urban areas of Lahore. The middlemen purchased land for fodder and grow fodder for dairy farmers at very low cost but sell fodder on very high price to farmers. The dairy farmers are very much dependent on middlemen as far as price of fodder is concerned. Sometimes quality of green fodder is very poor and it is consumable for animals due to seasonal and transportation factors. The transportation of fodder is another major constraints and it cost much to farmers which turns into high cost of production and very low profit margins for poor farmers.

The other feeding sources are also involved including high pretentious diet to milking animals to increase milk yield. But unluckily it is so expensive that it cannot be affordable to all farmers in peri-urban areas. The modern scientific feeding based on balanced ration is not practiced due to lack of awareness and unavailability of skilled labor in these areas.

Chuffing of fodders: The green fodder is commonly used in peri-urban areas but if it is used as such after harvesting, it increases the wastage by milking animals. The chuffing of fodder is important to reduce the wastage. The fodder is chuffed with chuffing machine with electric motors. Some farmers have their individual machine if number of animals more than 40 at one farm. The small farmers cannot afford their individual chuffing machine and group of small farmers purchased shared machine to reduce the cost of electricity bills and maintenance cost of machine.

Watering: The animals milk yield is very much dependent on good feeding, watering and washing facilities. Unfortunately in peri-urban areas of Lahore are lacking with poor infrastructure including poor and dirty water supply. The cattle colonies of Peri-urban have water 19

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supply system for animals and human consumption but this system become obsolete and poorly managed. Some farmers used their own electric motors for increase of water supply. The water consumed y animals are mixed with sewerage and causing lot of diseases in animals some of which are of zoonotic importance. The abundant supply of clean water is very much necessary for high milk yield and profit margins.

Washing: Due to poor water supply system most of washing of animals is in dirty ponds which are full of lots of disease causative agents including protozoa, helmenthesis, bacterias, viruses etc. The disease prevalence is very high in peri-urban areas and main reason is poor sanitation and washing areas. There are no biosecurities measures adopted in cattle colonies. It results into great epidemics and public health losses in peri-urban areas.

Milking Methods: The modern dairy sector of the world shifted from traditional milking methods from hand to modern milking methods from machine. In peri-urban areas of Lahore still farmers milk their animals through hand. The major issues in milking from hands are low milk ejection and variation in milking styles which increases the cases of mastitis in animals. Due to mastitis farmers looses very expensive animals and results into low overall milk production of farm and long term losses. Another factor which causes serious losses is use of oxytocin for milk ejection which is only practiced in milking from hands. The transfer of milk adulterants is also very much common due to unhygienic environment created by farmers in this milking method.

Mechanization and infrastructure: Most of the farms in peri-urban areas are unmachanized and farmers are totally unaware from the concept of mechanization. According to group of farmers, there is poor infrastructure in these areas including roads, sanitation system, transportation facilities, and health care system for farmers as well as for animals. Without proper

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infrastructure, discussion about mechanization is useless. Mechanization is very low in priority list of farmers and stakeholders.

Health Services: There are small dispensaries in some peri-urban areas listed in survey and most of the areas are neglected. Those areas having dispensaries they also have lots of issues including unavailability of medicine, vaccines, doctors and consultation. The veterinary assistants and peons are available to provide consultancy and write only prescription. It results into increase in cost of milk production due to consultation charges from private doctor, medicine cost and vaccination cost. It definitely results into low profit margins for farmers.

Insemination Services: The use of artificial insemination is fruitful tool to improve the breeding and genetic potential of animals. But unfortunately it is not practicing very much in peri-urban areas. It is little bit used in cows due to more conception rate in cows but according to farmers it is not useful in buffaloes. They used buffaloes bull for breeding from their own farms. It is not feasible to exploits the full potential of high milk producing animals in peri-urban areas.

Breeds of Cows and Buffaloes; Different breeds of buffaloes and cows are available in peri-urban areas. But there is no exact breed record available to farmers. The common breeds of buffaloes are Nili, Ravi and Nili Ravi. The breeds of cows are Sahiwal and cross breed cows. But very low concentration is paid on breeding and genetics of animals to improve milk production.

Labor Management: Labor is very important factor in dairy business in peri-urban areas. Dairy business is family dependent labor but problem is lack of human resource management practices in this sector which results in low performance of labor working in peri-urban areas. Labor productivity is low due to lack of trained and skilled labor. There is no proper training

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and extension facilities for farmers. The compensation to labor is very poor and most of people are hand to mouth and they are just killing their time. It results into lack of interests and commitment to their business ultimately lead to poor performance of dairy sector.

No. of Labor and No of animal Ratio: The number of labor and animal ratio is 1:8. There is one person responsible for eight animals at form. This ratio can be less by improving management practices and decreasing number of animals. The areas of concerns are modern milking methods, feeding practices and mechanization at farms.

Record keeping: It is important to keep records of dairy farms to improve dairy economics. But it is most ignoring areas in peri-urban areas. They dont have any records of feed consumption, feed cost, disease rates, vaccination schedule, Financial statements, Cost of milk production, sale value of milk, Average unit productivity and profitability of farmers. Most of them are unorganized and they are not interested in record keeping. It results in poor planning of resources and their utilization in effective way to get high profit margins by reducing cost and disease prevalence.

Management of Non lactating animals: Some of the farmers keep non-lactating animals at their farms to increase the feeding costs, and all others cost which disturb financial dynamics of the farms. Most of the farmers sell their non lactating animals which sometimes results into permanent loss of high productive breeds of animals.

Farmers Community: The farmers keeping the milking animals in peri-urban have family businesses and them and their families are involved in this business from so many years. The land occupied by farmers in two major cattle colonies including Harbanspura and Rakhchandra are donated by government for milk production. These reforms are made by government

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after evacuating animals from urban areas. Some farmers are literate and they have some awareness regarding best management practices but most of them are under matric and middle and dont know to write and read material regarding their profession. Most of the farms are working under family labor environment.

Milk Supply System: Milk is produced from dairy farmers in variable quantity depending on number of milking animals and better management practices. Dodhi/Gawals collects 60-70% of from dairy farmers in peri-urban areas. Milk collected from Dodhi/Gawals is distributed by different channels. The 70% of milk collected from them are distributed to End consumer as home delivery because civic population of Lahore mostly consumed milk from Dodhi/Gawals. The major issues in this milk are adulteration because transportation facilities are very poor and there is no cold storage supply chain so far is available. As we know milk is perishable commodity and without proper storage facilities it results into adulteration. But from this survey it came to know that 90% of milk adulteration is deliberately caused by Dodhi/Gawals to meet their supply targets.

The milk produced from peri-urban areas and small cities near Lahore are unable to fulfill the demand of civic population of Lahore. It means there is adverse imbalance in supply and demand of milk in Lahore. But we cannot quantify the exact quantity of milk coming from peri-urban areas and areas around Lahore due to shortage of time and resources. In future it needs further investigation to pinpoint the exact percentage and quantity to make better policies to balance the supply-demand curve of milk in Lahore.

The milk collected from Dodhi / Gawalas is also distributed from other channels including Whole sale milk shops and milk sale points in urban areas of Lahore. It includes rest of 30% of milk supply by Dodhi / Gawalas. This milk collected by these milk shops ultimately supplied to end consumer.

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The halwai and hotels are also part of milk supply channels in peri-urban areas of Lahore. It constitutes 10-20% of milk supplied. These halwai and hotels processed this milk into different milk by-products or milk directly consumed by consumers.

The milk in peri-urban areas are also collected by milk collectors and transported to milk collection centres of milk companies including Nestle, Chaudary Dairy and Engro foods. It constitutes rest of 5-10% of milk collected in peri-urban areas of Lahore.

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Milk By-Products
Milk consumption across the categories of purchasers Categories of milk purchasers Average up to 100 liters Sum of this N=6 (10%) category Share of this category Average 100 to 200 liters N=24(40%) Sum of this category Share of this category Average 300 to 400 liters N=15(22%) Sum of this category Share of this category Average Above 400 liters N=15(28%) Sum of this category Share of this category Average Total N=60(100%) Sum of this category Share of this category Total milk 68.6 412 1.90% 171 4110 18.50% 318 4783 21.50% 862 12930 58.20% 370 22235 100.00% 139 (38%) 8383 100.00% 230 (62%) 13852 100.00% 301 (35%) 4520 560 (62%) 8410 107 (34%) 1610 211 (65%) 3173 86 (50%) 2075 84 (49%) 2035 Used for by products 29.6 (43%) 178 Sold to end users 39 (57%) 234

According to conducted survey of sample milk purchasers/collection centers, almost 10% purchase up to 100 liters, 40% purchase 100 to 200 liters, 22% purchase 300 to 400 liters and 28% buy more than 400 liters milk daily. 10% milk centers buys averagely 68 liter daily, where they use 30 liters for by products and rest 38 liters sale to end users of milk. This category of milk centers buys only 2% total centre market of Lahore. 40%

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of milk centers make purchase of 171 liters daily on average, where 86 liters are used for making by-products and 84% liters are sold to end users. This category has 18% share of milk purchase in dairy market. 22% milk centers purchase daily 318 liters on average, where 107 liter consumed for developing by-products and 211 liters are sold for general users with 21% market share. 28% milk centers hold largest market share of 58% with 12930 liters daily purchase on average. They make various dairy products from 4520 liters and make sale of rest 8410 liters. Yogurt production across the categories of purchasers Categories of milk purchasers Average Sum of this up to 100 liter category N=6 (10%) Share of this category Average Sum of this 100 to 200 liter category N=24(40%) Share of this category Average Sum of this 300 to 400 liters category N=15(25%) Share of this category Average Above 400 liters N=15(25%) Sum of this category Share of this category Average Sum of this category Share of this category Production Daily in liter 26.5 159 2.50% 75.3 1732 26.90% 95.8 1437 22.40% 238.5 3100 48.20% 112.8 6428 100.00% 38.7 39.1 38.5 38.6 Price per liter

38.6

Total N=60(100%)

The yogurt is most prominent by-product in the dairy industry of Punjab. Milk centre purchase up to 100 liter of milk, produce 26 Kgs of yogurt daily on average, with 2.5% share of total yogurt market. The milk centre of 100 to 200 liters produce 75 Kgs yogurt 26

Dairy Economics Survey

daily on average, with 27% market share. The purchasers of about 400 liter milk, use 95 liter for yogurt production, making 22% yogurt market share. The milk centers, buy above 400 liters milk daily, consume 238 liters daily for yogurt production. Averagely, the milk centers produce 113 Kgs of yogurt daily and sale on the price varies from 38 to 39 rupees. Production and sale of other by-products Types of by products Butter in Kg (10%) Cheese in Kg (4%) Ghee in Kg (2%) Flavored milk in liter (73%) Khoya in Kg (12%) Total Average Sum of this category Share of this category Average Sum of this category Share of this category Average Sum of this category Share of this category Average Sum of this category Share of this category Average Sum of this category Share of this category Average Sum of all categories Daily Production 85 170 9.90% 32.5 65 3.80% 12.5 25 1.50% 89.3 1250 72.70% 105 210 12.20% 78.2 1720 Sale price 250

135

350

25.7

233

Along with yogurt, numbers of other dairy products are produced in urban and per-urban areas of Lahore. Among milk centers of Lahore, 10% produce butter, 04% Cheese, 02% Ghee, 73% flavored milk and 12% produce Khoya. 85Kg butter is averagely produced constituting 10% of by-products market other Yogurt. Butter is sold at Rs. 250 per kg. Cheese contribute 4% share with average production 32 kg by cheese producers. Cheese is being sold at Rs. 135 per kg. Very few milk centers produce Ghee , which stands almost 1.5% market share of Ghee producers, with 25kg average production, sold at Rs. 360 per kg. Majority of milk centers produced 89 liters flavored milk daily on average, taking 72% share of diary by-products, sold at Rs. 25 per liter. Khoya also have significant share of 12% in dairy by-products with average daily production of 105 kgs, which is sold at Rs. 233 per kg by Khua producers. 27

Dairy Economics Survey

Major Findings
Dairy industry is a labor-intensive business with lot hygienic considerations in milk transportation. The Pakistan is rich in dairy industry as allied to agriculture and based in 70% rural population of the country. Lack of training and dairy related education hinders opportunity of value addition with undue cost of poor transportation, low quality and mismanaged distribution. Lack of marketing and supply chain in dairy industry is another bottleneck of development.

This survey brings forward the valued findings, which may help the planning departments, key stakeholders, policy makers and other associated to take effective decisions in the operations of dairy industry.

1. The proportion of small milk producers is quite high, which hinders the economies of scale and profitability in the dairy industry 2. 82% milk is contributed by buffaloes with averagely 18 buffaloes with one farmer, while 4 cows are averagely owned by one farmer with 18% share in the milk industry. Maximum buffaloes are 85 and cows are 35 with a farmer 3. Average milk production of farmer is 120 liters. Further segregation reveals that 63% farmer produce 48 liters, 21% produce 135 liters, 11% produce 295 liters and 5% produce 592 liters on average daily. 4. The average unit productivity of milking animals in peri-urban areas of Lahore is 11.8 liters milk per day. 5. The buffaloes and cows have insignificant difference in quantity of milk on average daily. 6. The average spending of a farmer is 16370 per month and Rs. 3274 per day. The farmers spend daily Rs. 140 on labor, Rs. 2906 on feed, Rs. 18 on vaccination, Rs. 36 on medicine, Rs. 56 on utility bills and Rs. 119 on transportation of milk. 7. Averagely, 370 liters milk is purchased daily by a milk centre, where 38% is consumed for making by products and rest 68% is sold to consumers.

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8. Almost 10% milk centers purchase averagely 68 liters of milks, using 43% for making by products and rest 57% is sold to consumers. 40% milk centers with 18% market share, purchase 171 liters daily on average, consume 51% for by products and sale rest 50% to end users.

9. 22% milk centers buy 318 liters milk daily on average, consuming 34% for by products and 65% for general sale. 28% milk centers purchase in bulk like 862 liters daily on average, utilizing 37% for by-products and rest 63% sold to general users 10. Milk centers of Lahore reported yogurt as primary by-product produce from the milk. Rate of yogurt production varieties as: buyer of up to 100 liters milk, produce 26 Kgs, 100-200 liters produce 75Kgs, 300-400 liters produce 95Kgs and milk centers take above 400 liters milk daily 238 Kgs yogurt daily on average. At aggregate, a milk centre produce 112 kgs yogurt daily on average and sale on Rs. 38 per Kg 11. Among other types of by-products, 10% milk centers produce 85Kg butter on average. 04% produce 32 Kgs cheese, 02% produce 12Kgs Ghee, 73% produce 89 liters flavored milk and 12% produce 105 kgs Khoya on average daily.

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Recommendations
1. Large umbers of small farmers need to be given extensive training in the area of marketing, management and supply chain 2. Farmers need to be taught scientific method of feeding, fed combinations and other measure to raise milk production. 3. Latest sanitation procedures with technology application need to be introduced 4. New breeds and genetic combinations need to be introduced to have more healthier and productive animals 5. Coordination between farmers and veterinary officers need to be drastically increased 6. Environment related coaching is very much required for farmers 7. Government credit schemes should be offered for construction of sheds, purchase of transportation and new milking animals 8. Government promote milk and other value added dairy products in the domestic as well as international markets; 9. promote development and up-gradation of dairy supply chain in Pakistan by supporting and facilitating the farmers, processors and other stakeholders across the value chain; 10. initiate and support interventions across the dairy value chain to enhance sector competitiveness through innovations and research; 11. promote technology development, transfer, assimilation, streamlining, acquiring and/or up-gradation across dairy value chain by undertaking new initiatives; 12. Government introduce international best management practices for better productivity and operational efficiencies; 13. Government initiate need based training and development programs of human resource working in dairy industry. 14. The personnel development program should be designed to maximize the interactions between discipline specialists and disciplines so that impact of the training program is long-term. Thus it is imperative to engage local training institutes to ensure the conduction and implementation of training program 30

Dairy Economics Survey

References
Tanvir Ali(2006) A case study of milk production and marketing by small and medium scale contract farmers of Haleeb Foods Ltd., Pakistan University of Agriculture, Faisalabad - Pakistan. Burki, A. A., Khan, M and Bari, F. (2005). The state of Pakistans dairy: An assessment, CMER Working Paper, 05-34, LUMS: Lahore PISDA-USAID (2006). The White Revolution: Strategic Plan for the Pakistan Dairy Industry, A Report available on Internet Govt. of Pakistan, (2006). Economic Survey 2005-06, Islamabad: Ministry of Finance, Islamabad, Pakistan Umme Zia(2007), Improved market access and smallholders dairy farmers participation for sustainable development, consultancy report CFC/FIGMDP/16F Livestock Action Plan (September, 2003) Action Plan For Livestock Marketing Systems In Pakistan, Social Sciences Institute,National Agriculture Research CenterFood and Agriculture Organization of the United Nations Ali and Saifullah (2006) Milk production and marketing, Dawn, Internet edition

January, 2006, Monday

Peter Waynn et al (2006) Mission carried out under the auspices of the Australia Pakistan Agriculture Sector Linkages Program. Report on Dairy Mission of Pakistan How pollution is a brake on dairy industry? by Shahid Husain http://www.pakissan.com/english/issues/how.pollution.shtml (Accessed on 3rd July, 2008) The dairy industry by Shamim Ahmed Rizvi http://www.pakistaneconomist.com/issue2000/issue21/i&e1.htm (Accessed on 3rd July, 2008) Improving peri-urban dairy farms by Dr Ali Muhammad Khushk and Aslam Memon http://www.pakissan.com/livestock (Accessed on 3rd July, 2008)

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