Commercialization of Livestock in Nepal

7/30/2019 Commercialization of Livestock in Nepal

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Commercialization of Dairy Farming in Nepal

Heramba B Rajbhandary

Laxman Sherchand

Why Commercialization Needed?

Because of subsistence farming system where livestock is one of the essential

components especially for milk, meat, manure and ploughing, most rural farmers take

livestock unit as the living bank for their livelihood. Grown-up children of farming

community do not follow their parental occupation which is traditional and low income

producing. Rather they prefer to work as laborers in gulf and other countries for hardcash earnings. The statistics reveal that young adults exit the country by around 500 a

day for work. At present, livestock are being raised mostly by older generation. Outflow

of active population resulted in a shortage of labors in the rural farming system. The

resultant effect is that there is acute shortage of milk around 500 thousand liter a day

and 300 thousand castrated goat a year.

In order to retain these active population in the country, one of the viable solution is to

commercialize the dairy farming and thereby establishing small dairy enterprise in main

marketing hub throughout the country. Such commercialization would generate

employment and at the same time help import substitution of SMP through substantially

increasing the low cost of milk production.

The present paper focuses on dairy commercialization since the dairy sector contributes

more than 60% livestock GDP. Objectives of this paper are to a) meet the shortage of

500 thousand liter milk a day 14% of total production deficit, b) substitute the import of

fluid milk, skim milk powder (SMP), and dairy animals, c) make dairy production as

economically viable dairy enterprise providing attractive employment opportunities foryounger generation, e) generate small dairy enterprises and its product diversification

by substantially increasing the green coverage of land through forage production in

personal and community land.

Present Status and Challenges of Dairy Production


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Share of dairy production is more than 60% of livestock Production in Nepal. Milk is

produced by the farmer in a subsistence manner i.e. farmers keep only 1-3 dairy cows

or buffaloes just for generating some money required for household chores except few

commercial farmers in the country. The country faces the challenge of milk deficit. The

mega SMP plants at Chitawan and Pokhara could not meet their requirement of 2.5

million milk a day alone resulting milk deficit. The daily milk requirement of SMP plants

and small to medium dairy industries could only be met by commercialization of dairy

farming at large.

The second challenge is high cost of milk production as compared to neighboring

country, India that provides subsidies to dairy farmers. Here in Nepal, dairy animals are

mostly reared on grain concentrate and rice straw feeding resulting low milk production

with high cost of production. Forage based dairy farming is the only solution to lower the

high cost of milk production provided dairy animals are of high genetic protential.

The third challenge is low producing dairy animals. Main hurdle of dairy

commercialization is inadequate availability of high milk producing dairy animals. Until

this challenge is met, real commercialization of dairy farming is not possible at the

present level of genetic improvement program.

Gradual transformation of subsistence dairy farming into commercial dairy enterprises isway out for meeting the existing challenges. Dairy farming and enterprise friendly policy

and its sound implementation is the key to achieve full commercialization of dairy

production within 5-year period.

Present Solution

1. First priority is to launch Artificial Insemination (AI) Mission: First step to

meet the commercialization challenge is to initiate the AI Mission in potential

dairy pocket area massively such that at the end of fourth year of the Mission,

sizable number of high yielding dairy cows will start producing milk. Within five

year period of AI Mission, required number of high producing dairy animals will

be in the commercial dairy farms. The Mission has to be launched effectively

under public-private partnership program.


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2. Parallel to first priority, Forage Mission has to be launched in public and private

land in dairy pocket area so that by the time high yielding cows are produced,

genetic potentiality of dairy animals is being harnessed through green forage

feeding. At the same time, cost of milk production will be significantly reduced to

maximize the profit margin from commercial dairy farming. As the result, more

and more entrepreneurship oriented farmers will be attracted to establish

commercial dairy enterprise.

3. For immediate solution to meet the milk deficit, the government should request to

Indian government for allowing required number of high yielding dairy animals to

Nepal. The importation of dairy animals from India should be begun after one

year. Within the first year, forage Mission has to be implemented so that the

imported dairy animals will be reared on green forage..

4. The milk collection center has to be equipped with chilling vat and milk analyzer.

Every center has to be tiled and sanitized.

5. Transformation of conventional dairy production to commercial production

at least in minimum economic size is to offer attractive return. The

economic size of dairy farm model is given below.

What is Economic Size for a Farm Family?

Buffalo- A model of 6 milking buffalo giving a monthly income of Rs 21,000/

Cow - A model of 6 milking cow giving a monthly income of Rs 31,000/

What is Milk Pocket Area?

Conventional milk Collection Area to be upgraded to a minimum level of

1000 liter per day

Minimum of 10 professional farm families each to be upgraded with 1

buffalo model to be giving in total 400 liters of milk

Minimum of 10 professional farm families each to be upgraded with 1 cow

model to be giving in total 600 liters of milk


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Pre-requisite for commercialization of Dairy Pocket Area

Establishment of

AI Center with improved service facilities

Animal health care unit

Forage base for necessary for forage production and feed

supplement

Credit Institution

Animal insurance

Cooperative Milk Chilling Center networking with dairy milkcollection center

Coordinating body for above services

Dairy Production commercialization through

Massive importation of milking cattle and buffalo (who does this job?

Govt ?, Coordinating body ? Private sector ? Who else?

Confirmation of flow chart of import

Intensive animal health program including quarantine

Forage area development in advance of recommended forage species in

dairy pocket area

Marketing Extension

Networking of milk collections

Encouraging small dairy enterprises into various dairy products

Networking the dairy products with value chain system with

national Dairies

Strategy of Dairy Commercialization


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Dairy Commercialization in 3 Phases

1st Year 2nd Year 3rd Year

DDC 50 K 50 K 50 K

Private Dairy 50 K 50 K 50 K

Powder Plant & others 100K 100K 100K

Total 200K 200K 200K

We Need Milk from Cows & Buffaloes

1st Yr 2nd Yr 3rd Yr

DDC: From Cows 30 K 30 K 30 K

From buffalo 20 K 20 K 20 K

Private Dairy: From Cows 30 K 30 K 30 K

From Buffalo 20 K 20 K 20 K

Powder Plant: From Cows 60K 60K 60K

From Buffalo 40K 40K 40K

Total 200K 200K 200K

Need of No. of Milking Cows & Buffaloes

1st Yr 2nd Yr 3rd Yr

DDC: Dairy Cows 3000 3000 3000

Dairy buffalo 2000 2000 2000

Private Dairy: Dairy Cows 3000 3000 3000

Dairy Buffalo 2000 2000 2000


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Powder Plant: Dairy Cows 6000 6000 6000

DairyBuffalo 4000 4000 4000

Total : Dairy Cows 12000 12000 12000

Dairy buffallo 8000 8000 8000

Commercial Model 1: Five Milking Animals(Cow)

No of milking cows 5+1

Milk yield/cow/day 12 liter

Cost of milk production/liter Rs 14

Price of milk/liter Rs 36

A. Total cost of milk prod. (12*5*14) Rs 840

B. Total income from milk sale (5*12*36) Rs 2160

Gross Income/day (B-A)/day Rs 1320

Investment for 6 cows @50K Rs 300K

Interest @ 18% Rs 54K

Repayment of principal (300K/5yr) Rs 60K

Investment cost /lit Rs 5.20

(54K+60K)/(5cow*12lit*365)

=114,000/21900

a. Invest.cost/day (5.2*12*5) Rs 312

b. Running cost/day (5*12*14) Rs 840

A. Total Cost (a+b) /day Rs 1152

B. Daily Gross Income (5*12*36) Rs 2160

C. Net Income/day(B-A) Rs 1008

D. Yearly Net Income (C*365) Rs 367.920


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Net Income/mon (D/12) Rs 30.660/ (excluding labor, health

care)

Commercial Model 2: Five Milking Animals(Buffalo)

No of milking cows 5+1

Milk yield/cow/day 8 liter

Cost of milk production/liter Rs 14

Price of milk/liter Rs 38

A. Total cost of milk prod. (8*5*14) Rs 560

B. Total income from milk sale (5*8*38) Rs 1520

Gross Income/day (B-A)/day Rs 960

Investment for 6 cows @60K Rs 360K

Interest @ 18% Rs 64.8K

Repayment of principal(360K/5yr) Rs 72K

Investment cost /lit Rs 9.37

(64.8K+72K)/(5cow*8lit*365)

Salvage value/liter Rs 3.29

Live weight 400 kg* Rs 100*6 =240,000/

Net Investment cost = IC-Salvage

= 9.37-3.29 = 6.08Invest.cost/day (6.08*8*5) Rs 243

b. Running cost/day (5*8*14) Rs 560

A. Total Cost (a+b) /day Rs 803

B. Daily Gross Income (5*8*38) Rs 1520


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C. Net Income/day (B-A) Rs 717

D. Yearly Income (C*365) Rs 261,705

Net Income/mon (D/12) Rs 21,808 (excluding

labor, health care)


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Commercial Model Requirement

(For 200K Milk/day in First Year)

60% Cow Model 1 + 40% Buffalo Model 1

No. of Cow Models = 2000

No. of Buff. Models = 1333

If required milch cows and buffaloes to be purchased, then

Total investment required = Rs. 1080m

How to Make Commercialization Mission A Success?

A. Government Role in dairy pocket area

Declare five years of Dairy Production

Identification of dairy pocket area

Flow Chart of dairy animals import

Intensive animal health care program

Focus on forage production

Subsidy to commercial banks interest at least by 10% (Rs. 108

million per year)

Government Role in dairy pocket area..

Strengthening the servicing agent of the government:

AI

Forage

Animal health care

Quarantine

Dairy production and extension

Subsidy to milk chilling and transportation


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VAT free for Dairy Processing Enterprises for five years

Facilitate marketing network of value chain system for raw or

processed milk product

Declaration of Tax Free Zone for dairy enterprises in remote hills andmountains at least for 10 years

Treat Private Dairies as a partner of dairy development program and

facilitate them making provision with soft loan and other facilities

Partners of production, processing and marketing

Lesson of milk holiday of the past

All partners of production should be equally stronger

Government

Public sector

Private sector

Cooperative sector

Development of strong value chain system

Price regulation by competition

Role of Academic Institutions

Introduction of Livestock Commercialization course (4 credit hour) in

University Curriculum in final year

Content of the course

Economic size of dairy production unit

Economic size of milk pocket

Necessary forage base for a milk pocket

Intensive animal health program for milk pocket


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Recommend feed formulation for dairy animals and quantity

requirement for milk pocket

Role of Academic Institutions

Milk handling and management of milk chilling center

Milk payment system

Introduction of model dairy enterprise

Role of Private Dairy Industry

Train the livestock farmers in their respective milk pocket area

Upgrading the milk production into economic size Help developing the economic size of milk pocket

Help networking the milk pocket for milk collection

Help developing small dairy enterprises linking to their value chain

system

Close coordination and integration among serving agents at the

government level

Specialization of production at the field level

Thank you for your kind attention

Commercialization of Livestock in Nepal

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