Bankable Project Report for a Dairy

Farm Starting with 10 Buffaloes

By
Dr. Vishnu Vardhan Reddy Pulimi
M.V.Sc (Animal Nutrition)
Veterinary Assistant Surgeons,
Animal Husbandry Department
Andhra Pradesh
Contact No: +91 9177568030
Email: dr.vickylolo17@gmail.com
 ACKNOWLEDGEMENT

I have immense pleasure in presenting this Project on Dairy Farming starting

with 10 buffaloes. The Subject is an interesting one. It gave us an opportunity to

have a detailed study on the subject and showed how things work in the practical

world. I came to understand and analyze the importance and the role of Indian Dairy

Industry and Dairy farm Management.

I had a great time working on the project and I have provided information to

the fullest of our knowledge and findings.

I wish all the best to Entrepreneurs who want to explore and do the dairy

business.

Regards,

Dr. Vishnu Vardhan Reddy Pulimi

M.V.Sc (Animal Nutrition)
 PURPOSE OF THE DOCUMENT

The objective of this pre-feasibility study is primarily to facilitate potential

entrepreneurs to provide an overview about Dairy Farming. The document may form

the basis of an important investment decision and in order to serve this objective, the

document covers various aspects of dairy startup, production, finance and business

management.

The purpose and scope of this information memorandum is to introduce the

subject matter and provide a general idea and information on the said area. All the

material included in this document is based on data/information collected from

various sources and is based on certain assumptions.

Although, due care and diligence has been taken to compile this document,

the contained information may vary due to any change in any of the concerned

factors, and the actual results may differ substantially from the presented

information. The prospective user of this memorandum is encouraged to carry out

additional diligence and gather any information he/she feels necessary for making

an informed decision.
 DISCLAIMER
This project report has been prepared by “Dr. Vishnu Vardhan Reddy Pulimi” is for

information purposes only. This report does not constitute an offer, invitation or inducement to

invest in any sector or industry. Neither the information contained in this project report nor any

further information made available with the subject matter contained herein will form the basis of

any contract. Any recommendations contained in this document must not be relied upon as

investment advice based on the recipient's personal circumstances. In the event that further

clarification is required on the words or phrases used in this material, the recipient is strongly

recommended to seek independent legal or financial advice.

The material in this project report is general information intended for recipients who

understand the risks and opportunities associated with making investment in India specifically in

Dairy sector.

It does not take account of whether an investment, course of action, or associated risks are

suitable for the recipient. This report does not purport to be comprehensive or to contain all the

information on which a prospective investor can make an investment decision. The information

contained herein is based on publicly available information and sources, which i believe to be

reliable, but i do not represent it as accurate or complete. The recipient of this report must make

his own investigation and assessment of the information presented herein.

No representation, warranty or undertaking, express or implied, is or will be made or given

and no responsibility or liability is or will be accepted by us, in relation to the accuracy or

completeness of this project report or any other written or oral information made available in

connection with the information presented herein. Any responsibility or liability for any such

information is expressly disclaimed.

 Dairy Farming
1. Introduction:
India’s dairy market presents lucrative and impactful opportunities. A growing market that
is poised for success, this report details the underlying factors that are fueling such growth.
Moreover, this report is meant to give the reader a deeper understanding of the Indian dairy
market by providing a holistic overview of market drivers, challenges, opportunities,
investment metrics, and insights from leading companies and investors in the space.
2. Scope for Dairy Farming and its National Importance:
India is endowed with the largest livestock population in the world. It accounts for about
57 per cent of the world’s buffalo population and 15 per cent of the cattle population. The value
of output of milk is Rs. 6,14,387 crore in 2016-17. India’s milk production increased from
165.40 MMT in 2016-17 to 176.35 MMT in 2017-18 and planning to produce 240 MMT by
2023-24 with growth rate of around 6% per annum. The per capita availability of milk in India
during 2017-18 was 375 gm/day and by 2023-24, it is estimated to increase to 592 gm/day with
around 10% increase per annum. To achieve this demand annual growth rate in milk production
has to be increased around 4% additionally per annum. Thus, there is a tremendous
scope/potential for increasing the milk production through profitable dairy farming.
Central and State Governments are giving considerable financial assistance for creating
infrastructure facilities for milk production.
3. Beliefs in Dairy Business:
Dairy Farming (as a business); keeping large number of animals & following Scientific
methods has just started a few years ago but is picking up very fast due to Its several advantages
viz.
a) Steady business with steady income unaffected by Recession.
b) Milk can be sold directly from the farm (No Marketing setup needed)
c) No brokers; price is already declared by the Government.
d) Selling rate of milk has been consistently increasing over a period of time.
e) Consumption accepted by all religions, caste & creed.
 Further to my interactions with scores of people thinking of entering Dairy business all
across (especially India) the country it was quite evident that the general beliefs are:-
1. Dairy Farming is an easy business.
2. Animal gives milk throughout the year.
3. Dairy Business breaks even in the first year.
4. Compare to all other business, dairy business break even in the first year itself.
4. The Main Costs in Dairy Farming are:
Capital cost: For purchase of animals, construction of Shed & purchase of machinery, cans
etc. This cost occurs only once & is depreciable over a Period of time totally.
Administrative Costs: includes appointment of a Farm manager, Supervisor, Skilled &
unskilled labours depending upon the requirements as well as the size of the farm. This is a
fixed cost for a certain period.
Recurring Cost: includes the Feeding & Management along with Vaccination, Insurance,
treatment & other miscellaneous costs. This is required daily & is liable to fluctuate at all times.
It will be essential to control these costs which will have a direct bearing on the production of
milk as well as Reproduction (birth of next calf). At the same time balancing of feed will also
determine the reduction of the Inter calving period which has a bearing on total profitability.
Dairy business can be done by being dependent on labors.
Dairy Business can be learned from the Net & by getting hold of Project report.
5. SWOT Analysis:
A SWOT analysis can help in analyzing these factors, which can play important role in
making the decision. This particular pre-feasibility is regarding to “Dairy Farm Management”
which comes under “Livestock and Agriculture” sector. Before making the decision, one
should carefully analyze the associated risk factors & must consider following critical aspects,
which form the basis of any investment decision.
7.1 Strengths:
• Relatively cheap farmland.
• High domestic consumption
• Good milk quality.
• Ample human resource employment sector.
• Low cost living standard.
• Full family involvement, Devoted & Hardworking Sector.
 7.2 Weaknesses:
• High production costs.
• Low levels of bulk feed production.
• Poor management level in quite a few cases.
• Lack of education and initiative in farmer.
• Unorganized sector, unaware of basic farm management practices.
• No or low application of research work and pedigree record keeping.
7.3 Opportunities:
• Dairy products needs are much higher than supply.
• Commercially viable sector with great credit potential and absorption capacity.
• Vast range of area of operation, more needs and scope of development.
• Value added dairy products are in demand.
• Cooperatives can play a big role for development in dairy sector.
7.4 Threats:
• High risks of diseases in livestock.
• Imbalance between prices of inputs & outputs.
• Rising trend of cost of production with higher rate of interest as compared to profit ratio.
• Increasing level of poverty.
6. Risk Analysis
Some of the important challenges faced by Indian dairy industry may be identified as follows:
• Highly competitive market
• Competition between public and private sector
• Quality consciousness and standardization of product
• Security/ guarantee
• Fast changing Technology
• Technological collaboration
• Liberalization in policy and action
• Health/ Hygiene
• Emphasis on self- sustenance of supporting/ promotional organization leading to better
services from them.
Some important issues of the dairy industry are as under:
Breeding of animals and getting expected milk yield is a biological phenomenon, which
depends upon various factors. Dairy farming besides good planning requires hardworking,
reliable and alert manager. In India, usually persons from the family take the responsibility.
Inadequate management of feeding heard health and lack of quality control in various stage of
production can cause major loss affecting the profitability of the entire venture.

Issues and challenges at the small holder level:

The entire dairy Industry in India has its base in the small holders and marginal farmers.
These prime stakeholders of the entire value chain of milk are deprived of minimum resources
of land, labour, capital etc. The other constraints at the grass root levels are:

Key Challenges:
1. There is an increasing pressure on the land resources for cultivation of food crops and
fodder crops are not preferred.
2. Lack of good quality animal feed
3. Lack of animal health care facilities.
4. Lack of breeding and good quality artificial insemination facilities.
5. Low genetic potential of the animals
6. Lack of chilling capacities
7. High production costs
8. Lack of financial support.
Solutions & Guideline:
1.Every year there should be a progressive aim for breeding (including number of animals
to be maintained) and production.
2.Visiting dairy farms that run on commercial basis and have a discussion with experienced
farm owners. We need not have to rely much on others experience, analyze every event
logically and if needed consult with local Veterinarians for more information.
3. Plant to manage the farm on our own, look for opportunities to work for an existing farm
for a minimum period of six months.
4. Develop interest and study feed and fodder's market in your region, its difficulties in
relation to seasons.
 5. Manage a good team of laborers. You need to choose hardworking reliable persons
preferably with some experience. You can also train them for specific jobs.
6. Visit the cattle market occasionally. Observe animals on sale and talk with persons
engaged with purchasing of animals.
7. Read magazines on Dairy Industry and keep yourself informed.
9. Project Profile
The proposed pre-feasibility is for establishment of buffalo farm with increase per buffalo
milk production through state of the art farm management facilities, efficient and effective
utilization of dairy production and deployment of technologically advance infrastructure. The
project requires a unique mix of technology and herd composition that will make it possible for
investor to achieve economies of scales and attain high rate of return on investment.
10. Economic Viability
Overview of the Economics

S.No Parameter value

Details regarding the Animals

1 No of Animals 10
2 Cost of each animal 80000
3 Rate of insurance/animal/anum in % 5%
4 Animals in Batch 1 5
5 Animals in Batch 2 5
Production and Technical Assumptions
1 Average body wt. of animal in kg 400
2 Lactation days/Animal 300
3 Dry days/Animals 65
4 Average Milk Yield/Animal 6
5 Average inter calving period in months 14
6 Milk:Dry animal ratio 4:01
7 Milk price/liter 55
8 Manure production in kg/day/animal 10
9 Price of Manure per ton 800
10 Sale price of male calf 5000
11 Sale price of female calf 8000
12 Mortality rate of calves % 5
13 Mortality rate of large animals % 5
14 Culling rate of large animals % 10
 Feeding Details of the animals
1 Concentrate feed for maintenance during lactation 1.0
2 Concentrate feed/lit milk (in addition to maintenance) 0.3
3 Concentrate feed during dry period 1
3 Cost of concentrate feed/kg 25
4 Green grass for maintenance during lactation 26.4
5 Green grass during dry period 24.0
6 Cost of green grass/kg 1
7 Dry grass for maintenance 3.0
8 Dry grass in dry period 2.7
9 Cost of Dry grass/kg 8
10 Mineral Mixture during milk production in gm 30
11 Cost of min mix/kg 150

Details regarding the land development and shed construction

1 Bore well and water supply system (Lump sum) 50,000
2 Land requirement in acers 5
3 Land development/acre 20000
4 Shed area required/animal in sq. ft. 40
5 Cost of large animal shed construction/sq. ft. 450
6 Electrification cost in large animal and calf sheds (% over civil construction) 5
7 Calf shed area required/calf in sq. ft. 20
8 Cost of calf shed construction/sq. ft. 450
9 Electrification cost in calf shed (% over civil construction) 5
10 Area store room cum office/animal in sq. ft. 15
11 Cost of construction of store room cum office room/sq. ft. 600
12 Depreciation of civil structures % 10

Details regarding the labor

1 No of large animals can be maintained by each labor 10
2 Wage paid per each labor 12000
Details regarding the equipment and veterinary aid
1 Cost of chaff cutter 30,000
2 Cost of Milking Machine 0
3 Minor equipment cost/animal 500
4 Depreciation on equipment % 15
5 Cost for veterinary aid/animal 1500
6 Water and electricity charges/animal 1000
7 Miscellaneous expenditure/animal 500
8 Discount factor (for financial indicators) 5%
Estimation of Non-recurring cost

S.No Parameter Unit cost No of units Total cost

1 Cost of Animals 80000 10 800000
2 Cost of Insurance for animals 5% 10 40000
3 Land development 20000 5 100000
4 Cost of construction of shed for large animals 450 400 180000
5 Cost of construction of shed for calves 450 200 90000
6 Electrification of sheds 5 Lump sum 13500
7 Cost of construction of store cum office room 600 150 90000
8 Bore well and water supply system 50000 Lump sum 50000
9 Cost of chaff cutter 30000 1 30000
10 Cost of Minor equipment 500 10 5000
Total Non-Recurring cost 13,98,500

Lactation chart
Year 1 Year 2 Year 3 Year 4 Year 5
Batch Milk Dry Milk Dry Milk Dry Milk Dry Milk Dry
Days Days Days Days Days Days Days Days Days Days
1 1500 325 1500 325 1500 325 1500 325 1500 325
2 900 0 1500 325 1500 325 1500 325 1500 325
Second batch animals will be purchased after 6 months of purchasing of 1st batch animals
Total 2400 325 3000 650 3000 650 3000 650 3000 650

Feeding Schedule
Milk Day Dry Day
Type of Feed
Quantity Cost Quantity Cost
Concentrate Feed 2.80 70.00 1.00 25.00
Green Fodder 26.40 26.40 24.00 24.00
Dry Fodder 3.02 24.18 2.67 21.33
Mineral Mixture (gm) 0.03 4.50 0.00 0.00
Total 32.22 125.08 27.67 70.33
Feeding Economics
Type of Feed Year 1 Year 2 Year 3 Year 4 Year 5
Cost of concentrate feed 176125 226250 226250 226250 226250
Cost of green fodder 71160 94800 94800 94800 94800
Cost of dry fodder 64960 86400 86400 86400 86400
Cost of mineral mixture 10800 13500 13500 13500 13500
Total 323045 420950 420950 420950 420950
Herd Projection
Category Year 1 Year 2 Year 3 Year 4 Year 5
Opening Stock of Large Animals 5 10 10 10 10
Opening Stock of calves 5 5 7 8 9
Large animal purchased during the year 5 1 1 1 1
Calves purchased during the year 5 1 1 1 1
Calves produced during the year 0 9 9 9 9
Mortality of large animals 1 1 1 1 1
Replacement from insurance 1 1 1 1 1
Culled large animals 0 1 1 1 1
Mortality of calves 1 0 0 0 0
Sale of calves 5 7 8 9 9
Closing stock of calves 5 7 8 9 9
Closing stock of large animals 10 10 10 10 10

Estimation of recurring costs

S.No Parameter Year 1 Year 2 Year 3 Year 4 Year 5
1 Cost of concentrate feed 176125 226250 226250 226250 226250
2 Cost of green fodder 71160 94800 94800 94800 94800
3 Cost of dry fodder 64960 86400 86400 86400 86400
4 Cost of mineral mixture 10800 13500 13500 13500 13500
5 Cost of veterinary aid 15000 15000 15000 15000 15000
6 Water and electricity charges 10000 10000 10000 10000 10000
7 Miscellaneous expenditure 5000 5000 5000 5000 5000
8 Labor charges 12000 12000 12000 12000 12000
Total Recurring cost 365045 462950 462950 462950 462950

Total Expenditure
S.No Parameter Year 1 Year 2 Year 3 Year 4 Year 5
1 Cost of feeding 323045 420950 420950 420950 420950
2 Cost of labor 12000 12000 12000 12000 12000
3 Cost of veterinary aid 15000 15000 15000 15000 15000
4 Water and electricity charges 10000 10000 10000 10000 10000
5 Miscellaneous expenditure 5000 5000 5000 5000 5000
6 Depreciation on civil structures 36000 36000 36000 36000 36000
7 Depreciation on equipment 14775 14775 14775 14775 14775
Total Expenditure 415820 513725 513725 513725 513725
Income Calculation
S.No Parameter Year 1 Year 2 Year 3 Year 4 Year 5
1 Sale of Milk 792000 990000 990000 990000 990000
2 Sale of Manure 29200 29200 29200 29200 29200
Total Income 821200 1019200 1019200 1019200 1019200

Profit Loss Statement

S.No Parameter Year 1 Year 2 Year 3 Year 4 Year 5
1 Gross profit 405380 505475 505475 505475 505475
2 Gross profit/month 33782 42123 42123 42123 42123
3 Gross profit/month/animal 845 1053 1053 1053 1053

Estimation of Financial Parameters

Year Cash flow Present value
0 -1398500 -1398500
1 405380 386076
2 505475 458481
3 505475 436648
4 505475 415856
5 505475 396053
NPV 694614
IRR 15%
BCR 1.27