1.1.

Dairy production systems

There are three types of dairy production systems in Kenya namely: zero-grazing (intensive), semi-
grazing (semi-intensive) and open range (extensive). Zero grazing involves confining cattle to a
limited physical space where they are managed, fed, watered and milked. Open range involves free
grazing by the cattle, often with no supplemental feeds. Semi-grazing falls somewhere in the middle
and involves the combination of the two approaches. While zero-grazing requires higher investment
in fixed infrastructure and closer management of cattle, it normally produces higher yields per cow.
Semi-grazing and open range systems are less labour and investment intensive, but normally
produce lower yields. In the case of zero grazing in Kenya, the yields can be as high as 15-30 liters
per day per cow, much higher than the 1-2 liters observed on farms practicing the other two systems
in Kenya.

Feeding is a major cost component accounting for 70-80% of total cost. Due to the lower usage of
feeds and reliance on grazing, feeding costs are somewhat lower in the semi-grazing system. These
lower costs are however compensated by other higher costs, including labour per unit cost due to
lower yields. Individual costs vary widely by farm depending on the quantity and type of feeds used
and whether they are commercially produced or “home-made.” Switching to cheaper types of
forage and home production of inputs are strategies used by farmers to mitigate price hikes of grain
and commercial concentrates. 90% of production costs are variable, making cost and yield
management the main drivers of production profitability. Effective dairy management requires
instituting balanced feeding regime, and reducing seasonality. Balanced feeding is achieved when
marginal increase in cost of feeding equals marginal increase in yield. Most farmers do not actively
manage costs and are focused either on quantity of input or determine feeding regime based on
available cash flow. Reducing seasonality requires reducing reliance on grazing and practicing
annual feed planning. By reducing seasonality, farmers can capture more value in times of milk
shortages, and can even reverse the cyclicality by producing more milk when there is a shortage of
milk. Since most costs are variable, there is no need for economies of scale to spread the fixed
investment. However, effectively managing yield and cost requires a high investment of time and
knowledge. It also requires moving from subsistence dairy production to dairy as a business.

For most Kenyan dairy farmers, even though dairy is an important source of income, it is not seen
as a business where the aim is to maximize income and minimize costs. For many producers
keeping cattle is cultural and meets the need for domestic consumption and while providing some
cash flow. When compared to best practices, most of Kenyan smallholders practice the opposite.
They do not use Artificial Insemination (AI), do not feed the cows properly, do not water them
properly and use a minimum, if any, preventive health care. This results in low genetic quality of
cows which substantially under-produce even in respect to their already limited potential due to
poor health and insufficient nutrient intake. Complete reliance on grazing also makes milk
production seasonal. In the months after main rains, April to August, abundance of pasture leads to
a flush period when milk supplies are plentiful and in excess of the ability of the formal and
informal marketing systems to absorb resulting in milk glut. Yet during the dry season—January to
March—there is a huge shortage. Linking farmers to multinational Dairy companies with chilling
plants could definitely reduce milk glut on marketing point of view to near zero.
BACKGROUND OF THE
PROJECT
In Ethiopia, per capita
annual consumption of dairy
is just 11% of World Health
Organization recommended
levels (gain briefing paper dairy
in Ethiopia 2021). Meeting
the increasing demand for
milk and dairy products
cannot be realized without
rapidly
increasing the number of high
producing tropically adapted
cows, the number of
commercial dairy herds, and the
number of cows per herd and
productivity per cow.
In Gofa Zone genetic
improvement of indigenous
breeds through crossbreeding
and
upgrading, and the accelerated
production of crossbred cows
from farmers’ indigenous
breeds through artificial
insemination (AI) started more
than 8 years ago. However, the
number of improved breeds in
the Zonal administration is still
too small to transform the
current subsistence-based
smallholder dairy system to
market oriented commercial
dairy
production and boost milk
production to meet current
and predicted future domestic
demands.
Despite its potential for dairy
development, productivity of
indigenous livestock genetic
resources in general is low.
The annual rate of increase
in milk yield (estimated to be
1.2%) lags behind the
increment in human population
(estimated to be about 4.8%
per
annum) (Gofa zone plan and
development department annual
statistic data 2020) and this
resulted in large supply–
demand variance for fresh
milk. The FAO recommends
the
consumption of 200 liters of
milk per person per year.
The annual socio-economic
statistical abstract of Gofa zone
Plan and Development
department report shows that
the
average consumption of Bulki
Town was only 16 liters per
year. Demand for milk and
milk product is already
higher than supply across
Gofa Zone Bulki Town and
there is
only Two Milk processing
cooperative association and it is
not producing at full capacity
BACKGROUND OF THE
PROJECT
In Ethiopia, per capita
annual consumption of dairy
is just 11% of World Health
Organization recommended
levels (gain briefing paper dairy
in Ethiopia 2021). Meeting
the increasing demand for
milk and dairy products
cannot be realized without
rapidly
increasing the number of high
producing tropically adapted
cows, the number of
commercial dairy herds, and the
number of cows per herd and
productivity per cow.
In Gofa Zone genetic
improvement of indigenous
breeds through crossbreeding
and
upgrading, and the accelerated
production of crossbred cows
from farmers’ indigenous
breeds through artificial
insemination (AI) started more
than 8 years ago. However, the
number of improved breeds in
the Zonal administration is still
too small to transform the
current subsistence-based
smallholder dairy system to
market oriented commercial
dairy
production and boost milk
production to meet current
and predicted future domestic
demands.
 Despite its potential for dairy
development, productivity of
indigenous livestock genetic
resources in general is low.
The annual rate of increase
in milk yield (estimated to be
1.2%) lags behind the
increment in human population
(estimated to be about 4.8%
per
annum) (Gofa zone plan and
development department annual
statistic data 2020) and this
resulted in large supply–
demand variance for fresh
milk. The FAO recommends
the
consumption of 200 liters of
milk per person per year.
The annual socio-economic
statistical abstract of Gofa zone
Plan and Development
department report shows that
the
average consumption of Bulki
Town was only 16 liters per
year. Demand for milk and
milk product is already
higher than supply across
Gofa Zone Bulki Town and
there is
only Two Milk processing
cooperative association and it is
not producing at full capacity
BACKGROUND OF THE PROJECT
In Ethiopia, per capita annual consumption of dairy is just 11% of World Health
Organization recommended levels (gain briefing paper dairy in Ethiopia 2021). Meeting
the increasing demand for milk and dairy products cannot be realized without rapidly
increasing the number of high producing tropically adapted cows, the number of
commercial dairy herds, and the number of cows per herd and productivity per cow.
In Gofa Zone genetic improvement of indigenous breeds through crossbreeding and
upgrading, and the accelerated production of crossbred cows from farmers’ indigenous
breeds through artificial insemination (AI) started more than 8 years ago. However, the
number of improved breeds in the Zonal administration is still too small to transform the
current subsistence-based smallholder dairy system to market oriented commercial dairy
production and boost milk production to meet current and predicted future domestic
demands.
Despite its potential for dairy development, productivity of indigenous livestock genetic
resources in general is low. The annual rate of increase in milk yield (estimated to be
1.2%) lags behind the increment in human population (estimated to be about 4.8% per
annum) (Gofa zone plan and development department annual statistic data 2020) and this
resulted in large supply–demand variance for fresh milk. The FAO recommends the
consumption of 200 liters of milk per person per year. The annual socio-economic
statistical abstract of Gofa zone Plan and Development department report shows that the
average consumption of Bulki Town was only 16 liters per year. Demand for milk and
milk product is already higher than supply across Gofa Zone Bulki Town and there is
only Two Milk processing cooperative association and it is not producing at full capacity
On the other hand, the potential of dairy development in Bulki Town is very huge. The
existence of suitable agro-ecologies for dairy production, increasing domestic demand for
milk and milk products, and better market opportunity indicate the potential and
opportunities for dairy development in the Town.
The Project proposal of Family Dairy Farming Considering the important of dairy
farming to sustainable food value chain, and employment opportunities to the society, can
contribute immensely to poverty alleviation and improved nutrition in the Gofa Zone
Bulki town.
2.2. Support for the Project
There are some supportive roles expected from public and non-governmental
organizations that are supporting to ensuring smooth and effective implementation as
well as long-run sustainability of the anticipated project.
a) Gofa Zona and Bulki Town agriculture department/offices: organizations like
Zonal agricultural department, Bulki Town Administration agriculture sector provide
veterinary and other extension services. The service includes,
(i) treatment, vaccination and laboratory services;
(ii) AI services;
(iii) facilitate forage seed and feed market linkage, equipment supply for
producers;
(iv) provide training services 8 for producers;
(v) Provide advice and support for producers in their dealing with other sector
office like environmental protection Office, Health Office, trade and industry
Office.
b) National Artificial Insemination Centre: the center established to collect and
distribute improved breeds and to provide training for AI service providers. It supply
Siemens for AI service providers either private or government.
c) Non-Governmental Organizations; NGOs are engaged in direct provision and
facilitating the service development. Training related to dairy production, marketing
and dairy products processing. Financial Institutes; Financial services for dairy is a

critical issue to expand its

business and to run day to
day operation with enough
working capital.
Generally, the above mentioned
actors have a great roll towards
facilitating effective and
smooth implementation of the
project. Furthermore, Zonal
Agriculture and Wereda office
will give technical advice on
dairy and milk processing
technologies and control the
quality of milk processed.
critical issue to expand its business and to run day to day operation with enough
working capital.
Generally, the above mentioned actors have a great roll towards facilitating effective and
smooth implementation of the project. Furthermore, Zonal Agriculture and Wereda office
will give technical advice on dairy and milk processing technologies and control the
quality of milk processed.

course of activity is focuses on milk production and processing involving a range of value
addition on the main product.
THE SOLUTION OF THE PROJEC
 At present the low level of raw milk supply is critical at Gofa zone. Family Dairy
farming will supply raw milk and milk products to the society.
 There are different private small scale farm and household farm competitor in bulki
town. At city level one small scales dairy farm and 2 cooperatives that collects raw
milk from member. But this farm unit not actively produced milk at sufficient
quantity and quality. Due to this reason there no strong completion between them. We
distinguish ourselves from them by providing better quality milk at reasonable prices,
and delivering both fresh and special package refrigerated milk to the customer door.
 Possible interventions on the supply side could be strengthening of raw milk supply,
improving milk collection centers, provision of feed, logistics and breed
improvement. In the processing chain quality improvement, business linkages,
training, and technology transfer are important activities to be considered

5.3. Production Process

After the fresh milk is received it is filtered and pumped into the dump tank; it is then
chilled with help of a chiller so that the growth of bacteria is minimized .One percent of
the fat content is separated and chilled in a cold store. Then, the cream in either churned
to butter or sold as it is depending on the availability of local market. After the end of
cream separation process, the milk will then undergo different value added products like
milk, Butter and cheese. Milk products undergo pasteurization process; the pasteurized
milk is filled in the cooling tanks for delivery to urban milk distribution centers.
Pasteurized milk would be packed into 200 mille liter plastic containers, so two plastic
containers would be used to package one liter of pasteurized milk and distributed to the
market. Cheese and butter would be packed into 75 and 200 gram paper packages. After
separation, cream is held in stainless steel tanks and refrigerated at (4oC).
5.4. Production Capacity
The dairy farm will have 15 milking cows, which are exotic breeds, with better milk
production capacity. The farm size will increase to approximately 80 animals within 5
years. Average yield per cow is estimated to be 25 liters per day and the cows will give
milk for at least ten months. Overall daily total production is about 375 liters per day. In
addition, so as to supply more milk for processing, daily 70 liters of milk will also be
collected from surrounding farmer. Overall annual raw milk production is about 135,500
liters in the first year of production. The farm milk production will increase with the
growth in herd size in subsequent years.

OBJECTIVE OF THE PROJECT

4.1. THE OVERALL OBJECTIVE
The overall goal of the project is to contribute towards the economic development of
Ethiopia through using the existing investment opportunities in the Country and taking
advantage of the expressed policy incentives that emphasize on greater
commercialization of agriculture and enhancing private sector development.

THE MAIN AND SPECIFIC OBJECTIVES

The main objectives of the Organization is to provide various types of product that dairy
farming can produce for the local society of Bulki Town in short run and in the long run
for the people of Gofa zone overall and to maximize profit so as to sustain the project.
4.3. The Specific Objectives
In line with this the following are specific objects of the project.
฀ To introduce modern dairying and milk processing technologies to the surrounding
locality.
฀ To create job opportunity for skilled and unskilled local citizens.
฀ To create market linkages with small holder farmers in the town and its surroundings
฀ Reduce the environmental impact of our operation by devising methods such as
supplying of animals waste for farming and use of Bio-fuel
7
course of activity is focuses on milk production and processing involving a range of value
addition on the main product.
5.3. Production Process
After the fresh milk is received it is filtered and pumped into the dump tank; it is then
chilled with help of a chiller so that the growth of bacteria is minimized .One percent of
the fat content is separated and chilled in a cold store. Then, the cream in either churned
to butter or sold as it is depending on the availability of local market. After the end of
cream separation process, the milk will then undergo different value added products like
milk, Butter and cheese. Milk products undergo pasteurization process; the pasteurized
milk is filled in the cooling tanks for delivery to urban milk distribution centers.
Pasteurized milk would be packed into 200 mille liter plastic containers, so two plastic
containers would be used to package one liter of pasteurized milk and distributed to the
market. Cheese and butter would be packed into 75 and 200 gram paper packages. After
separation, cream is held in stainless steel tanks and refrigerated at (4oC).
11

complementary feeding as well as management technology adopted by family dairy

farming, we can share the experience and provide adult calves for reasonable price to the
local farmers. By doing this practice we can accelerate the adaptation of effective
breeding alternative technologies of artificial insemination and management technology.
5.18. Implementation Plan
The Project required 20,000 m2 of land in Bulki town Administration, which is an ideal
place for serving the purpose. The required amount of loan is expected to be obtained in
short period of time; the implementation of the project would not take more than Seven
months. The enterprise will start commercial production As of July, 2023 Action plane of
the activities of the project is presented below
12
The actual raw milk production will therefore begin at 133,500 litters in the first year of
production and the milk production will increase with the growth in herd size in
subsequent years.
7. Human Resources
Our management is expected to use resource wisely, operate profitably and abide by
law and regulations. We will have manager of farm whom graduated from University
with associate degree in Agribusiness and value chain management. The manager
oversees the total dairy farming operation, with daily responsibilities for managing
milking, milk house work, and fieldwork. Other assists with all farm responsibilities, with
daily responsibilities for maintaining herd health records, heifer raising, and fieldwork.
To manage the finance we appointed one partner from the family who has graduated from
university with Accounting and finance BA Degree controls the overall financial
activities of the organization. There will be contract/temporary employee’s work on the
farm on daily work for hygiene of the cows, harvest feed and manage available feeds,
transport milk to formal linked market and process milk further accordingly. The
personal plan reflect the need to booster our capability to match our position project farm,
will have the following staff
I. Dairy farm manager → BSc
II. Barn worker skilled - Contract
III. Veterinarian → diploma
IV. Pasture and worker→ skilled - Contract
The ultimate goal of all our employees is to meet or exceed our customers' expectations.
They are all empowered to take any reasonable action to avoid a customer leaving our
premises dissatisfied. Our continuous improvement policy encourages all employees to
continually look for ways to keep updated with the latest technology, to improve
processes, reduce costs and save time. This approach serves the goal of reducing costs
and delivery times, and increasing the service quality and customer satisfaction.
13
Table 2 Manpower Requirement and Labor Costs
No
Job Description
Vacant position
required
Monthly salary
Annually salary
1
General Manager
1
8,017
96,204
2
Farm Manager
1
6,000
72,000
3
Finance and Administrative
manager
1
6,000
72,000
4
Veterinarian
1
5,200
62,400
5
Accountant
1
5,200
62,400
6
Milk processing plant worker
1
4,667
56,004
7
Barn Worker
5
3,882
46,596
8
Marketing and sales man
1
4,667
56,004
9
Store keeper
1
3,000
36,000
10
Guard
2
3,000
36,000

Sub – total
15
49,633
595,608
11
Pension contribution (11%)

65,516.88
12
Grand total

661,124.88
8. PROJECT SITE/ GEOGRAPHICAL LOCATION
The geographical location of the project is SNNPR, GOFA ZONE, BULKI Town
administration, which is located west of Sawla town and 16 kilo meter distance far ways.
The project site is at “Mindre” site and we selected it because of the criteria its altitude
from see level is recommendable for the dairy farming – which is highland, the land of 2
hectare are owned by the partner (by the family) and there are Kalehiwot church dairy
farming near to our site by which we can share the experience of their farm work.
9. PROPOSED BUDGET AND TIME FRAME OF THE PROJECT
PROPOSAL
9.1. INVESTMENT COST
 Investment costs of a project are categorized as fixed and working capital. Fixed
investment costs are costs incurred for construction of fixed assets and/or to acquire asset
that are fixed in nature. Working capitals are to supply inputs required to produce the
proposed product items in the production year and pre operational. The overall
investment cost includes fixed cost, pre- operating cost & working capital estimated at
Birr 4,058,624.88 for details see below.
15
show an increasing trend during the life time of the project. The projected financial
statement shows that the project will remain profitable throughout its life.
9.5. Key assumptions
The financial analysis of the project where based on the data presented in the previous
chapters and the following assumptions:-
9.5.1. Production Related Assumptions
Two alternative production systems of milk processing and dairy are considered in the
project. Under operating costs, the primary component is working capital cost which has
been estimated separately for the milk processing and dairy units. There are no feed mills
that produce concentrate dairy and so the project has to source all ingredients/ crop by-
products/ to supplement production unit.
The project will initiate with 15 pregnant cows in single production year. Over the years
the size of the project will increase gradually reaching the limit of 80 cows in production
year. Dairy animals will be fed 3 kilogram of concentrate along with 7 kilogram of
roughage per head per day. The cost of concentrate and roughage feed per kilogram is
estimated to be 5 and 3 birr respectively.
9.5.2. Cost Related Assumption
Cost Assumptions Price ETB
Purchase price of pregnant heifers 60,000 Birr per Head
Purchase price of milk from local farmers 30 Birr per Liter
9.5.3. Revenue estimates
Revenue estimates are derived mainly from sales of Pasteurized milk
Expected sales Price ETB
Production of milk/ days/head 25 liters/day
Total Number of cows 15
Number of considered Days in a year 300 Days
Milk selling price per liter amt 40.00 Birr
PROJECT MONITORING AND EVALUATION
Monitoring of the project will be carried out as a continuous process to provide
qualitative and quantitative information & data on the management and technical aspects.
The monitoring system will not only focus on providing data on inputs, outputs and
effects but also considers the processes involved in project implementation. The
information so generated in the process will be used to improve management through
guiding management decisions to ensure effective implementation of the project. The
monitoring tool will be monthly report; business report will be done a regular manner. As
a result monthly reports on the progress business implementation will be prepared from
bottom to top level of management, and a follow up activities according to the schedule.

JUSTIFICATION
KDF is rapidly growing
There is a large extensive ready market for the business.
In addition, the availability of farm imputes at large in our homes and town is not a menace as
the produce is locally and readily available.
Tomato enterprise is located along the busy kericho route hence encouraged high demand also
due to well-developed infrastructure as encouraged accessibility in terms of transportation of raw
materials and delivery of products to various potential buyers unlike the other enterprises that has
been existing liked q greenhouse enterprises which is in the interior far and of the town is in the
interior far an do the town which is not difficult to access.