October 05, 2010Print : Business
LAHORE: Promoting small dairy farming could help developing countries, including Pakistan to reduce rural poverty as the cost of milk production in small dairy farms is significantly lower than in developed high-tech farms, according to a study conducted by the Food and Agriculture Organisation on Monday.
The study on the “Status and prospects for smallholder milk production” was carried out in Pakistan, Bangladesh, Cameroon, China, India, Morocco, Peru, Thailand, Uganda and Vietnam.
For industrialised countries, similar study was conducted for farms in Germany, New Zealand and the United States.
The report points out that a key determinant of milk prices is the cost of feed, which directly affects milk production through increased production costs and, indirectly, higher land values.
The demand for grain, an ingredient of dairy rations, is driven by the need for food, feed and fuel of a growing world population, it said.
The main cost advantage of smallholder dairy farming lies in the use of lower-cost feed and the overall ‘low-tech’ approach to milk production. Cows fed on crop residues in Pakistan, such as straw, are significantly lower-cost producers of milk than high-yielding grain-fed dairy cows.
The study also revealed that given rapid increase in feed prices over the recent past, this trend affects the competitiveness of small-scale dairy farmers in the developing countries.
As these smallholder dairy systems normally use much less compound feed per kilogram of milk than dairy farms in industrialised countries, rising feed prices increase the cost of milk production in the latter to a larger extent than in the low-yield systems, predominating in developing countries. Thus, as feed prices increase, ‘typical’ smallholder dairy farms become more cost-competitive.
It also said that small-scale milk producers incur low production costs. Thus, if well organised, they should be able to compete with large-scale, capital-intensive ‘high-tech’ dairy farming systems in the industrialised countries.
Average milk production costs in the three industrialised countries covered by the study was found 56 percent above the average production cost calculated for the 10 developing countries, while the average price of milk in the three industrialised countries is only 30 percent higher than that in the developing countries. Thus, the overall profitability of milk production appears to be higher in developing countries than in the industrialised countries.
Against an average farm size of 100 cows in the industrialised countries, the average farm size in Pakistan is only 1.8 cows or buffaloes.
The report said that 15 million dairy farming households, if properly facilitated, could be vehicles for eradicating rural poverty.
The study revealed that 50 percent of the milk produced is consumed by the farming households and 40 percent is sold through informal sector; less than 10 percent is delivered to formal milk processors.
By 2005, yearly milk consumption in Pakistan had reached 230kg per capita, which was significantly higher than 98kg in India the same year. The per capita consumption in Western Europe is in excess of 300kg of milk per annum against less than 30kg (and even sometimes as little as 10kg) in some African and Asian countries.
The dairy development may serve as a powerful tool for reducing poverty, the study revealed. It advises devising viable dairy development strategy for smallholders’ taking into account the strengths, weaknesses, opportunities and threats posed by the external environment.
The strengths of smallholder dairy systems are low production costs; high profit margins; low liabilities; limited liquidity risk; and relative resilience to the rising feed prices, the study revealed.