AME-1-Report-Economic of Milk Production in Peri-Urban Areas

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Dairy Economics Survey

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REPORT

August 2008

Presented By

Dr. Hamid Jalil

Director Planning & Evaluation Cell




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TABLE OF CONTENTS

Sr.

#Contents Page #

01 Executive Summary 03

02 Introduction 04

03 Aim of Study 10

04 Methodology 11

05 Source of Milk Production 12

06 Average Unit Productivity 14

07 Cost of Milk Production 16

08 Milk Supply Channels; Cost and Sale 17

09 Salve Value of Milk 18

10 Management Practices 19

11 Milk By-Products 25

12 Major Findings 28

13 Recommendations 30

14 References 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 andperi-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 peri-

urban 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.




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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 country’s 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 inraw form by informal agents in the marketing chain portion of the milk producers.

To ensure development of the country’s 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 ruralsubsistence 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 levelof 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 Pakistan’s dairy,

explore the sector’s 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 frommanuscript 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 : 30

Rakhchandra : 40

Thokar Niaz Baig : 13

Kamahn pind : 12

Bund Raod : 8

Chungi amar sidhu : 8

Shadara town : 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)No of

FarmersPercent

Up to 100 76 63

100 to 200 25 21

200 to 400 13 11

400 and above 6 5Total 120 100

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

Category TotalAverage

(Perfarmer )

Animalshare

Maximum

Total Milk Production 14387 120 1020

Milk from Buffaloes 11803 98 82% 1000 Milk form Cows 2587 22 18% 240

Number of Buffaloes 2132 1811.8liters

85

Number of Cows 468 411.6liters

35




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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

ProductionBrackets

FromCows

FromBuffaloes

TotalProduction

Up to 100

litersN=76 (63%)

Average (per farmer)

9.2 38 48

Bracketproduction 700 2921 3621

Bracket share 27.10% 24.70% 25.20%

100 to 200liters

N=25 (21%)

Average(per farmer)

28 108 135

Bracketproduction

691 2688 3376

Bracket share 26.70% 22.80% 23.50%

200 to 400liters

N=13 (11%)

Average(per farmer)

53 243 295

Bracket

production

686 3154 3840

Bracket share 26.50% 26.70% 26.70%

400 and aboveN=6 (5%)

Average(per farmer)

85 507 592

Bracketproduction

510 3040 3550

Bracket share 19.70% 25.80% 24.70%

Total (allbrackets)

Average(per farmer)

22 98 120

Share in total 100% 100% 100%Total Sum 2587 11803 14387

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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Cost of Milk Production

SpendingAverage

(monthly)Total

Average(Daily)

Family Labor 4204 504500 140Feed 87176 10461160 2906

Vaccination 531 62677 18Medicine/Drugs 1068 128205 36

Utility bills 1678 199650 56

Transportation 3561 423810 119Total spending in sample 16370 11780002 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 heftyprofit 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 farmer’s spending.




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Milk Supply Channels; Cost and Sale

Milk sale across supply channels

Channels Total % of Total Halwai/collection centre

N=26 (22%)1881 13.20%

Dodhi /GawalasN=87 (72%)

11252 78.20%

OthersN=7 (6%)

1254 8.60%

Total(N=120) 14387 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 sourceswhich 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 Total% ofTotal

Sale Value(Rs.)

Sold to endconsumers (Rs.)

Profit perliter(Rs.)

Halwai

N=26 (22%)

1881 13.20%28 32 4

Dodhi /GawalasN=87 (72%)

11252 78.20%32 35 3

OthersN=7 (6%)

1254 8.60%- - -

Total(N=120) 14387 100.00% - - -

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 thatlot 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.




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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-urbanareas 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




20

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




21

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 don’t 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




23

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 don’t 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.




24

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 Total milk

Used for by

products

Sold to end

users

up to 100 litersN=6 (10%)

Average 68.629.6

(43%)39

(57%)Sum of thiscategory

412 178 234

Share of thiscategory

1.90%

100 to 200liters

N=24(40%)

Average 17186

(50%)84


4110 2075 2035


18.50%

300 to 400litersN=15(22%)

Average 318107

(34%)211


4783 1610 3173


21.50%

Above 400

litersN=15(28%)

Average 862301

(35%)560

(62%)Sum of this

category 12930 4520 8410Share of thiscategory

58.20%

TotalN=60(100%)

Average 370139

(38%)230


22235 8383 13852


100.00% 100.00% 100.00%

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 Production Daily in liter Price per liter

up to 100 literN=6 (10%)

Average 26.5

38.6

Sum of this

category 159Share of thiscategory

2.50%

100 to 200 literN=24(40%)

Average 75.3

38.6Sum of thiscategory

1732


26.90%

300 to 400 liters

N=15(25%)

Average 95.8


1437


22.40%

Above 400 litersN=15(25%)

Average 238.5


3100

Share of this 48.20%category

Total

N=60(100%)

Average 112.8


6428


100.00%

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




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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 productsDaily

ProductionSaleprice

Butter in Kg(10%)

Average 85 250Sum of this category 170Share of this category 9.90%

Cheese inKg

(4%)

Average 32.5 135Sum of this category 65

Share of this category 3.80%

Ghee in Kg(2%)

Average 12.5 350Sum of this category 25Share of this category 1.50%

Flavoredmilk in liter(73%)

Average 89.3 25.7Sum of this category 1250Share of this category 72.70%

Khoya in Kg(12%)

Average 105 233Sum of this category 210Share of this category 12.20%

Total

Average 78.2

Sum of all categories 1720

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 , whichstands 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.




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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 onvaccination, 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 chain2. 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




References

Tanvir Ali(2006) A case study of milk production and marketing by small and mediumscale contract farmers of Haleeb Foods Ltd., Pakistan University of Agriculture,

Faisalabad - Pakistan.Burki, A. A., Khan, M and Bari, F. (2005). “The state of Pakistan’s dairy: Anassessment”, CMER Working Paper, 05-34, LUMS: Lahore

PISDA-USAID (2006). “The White Revolution: Strategic Plan for the Pakistan DairyIndustry”, 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 participationfor sustainable development, consultancy report CFC/FIGMDP/16F

Livestock Action Plan (September, 2003) Action Plan For Livestock Marketing SystemsIn Pakistan, Social Sciences Institute,National Agriculture Research CenterFood andAgriculture Organization of the United Nations

Ali and Saifullah (2006) Milk production and marketing, Dawn, Internet editionJanuary, 2006, Monday

Peter Waynn et al (2006) Mission carried out under the auspices of the AustraliaPakistan Agriculture Sector Linkages Program. Report on Dairy Mission of Pakistan

“How pollution is a brake on dairy industry”? by Shahid Husainhttp://www.pakissan.com/english/issues/how.pollution.shtml (Accessed on 3rd July,2008)

“The dairy industry” by Shamim Ahmed Rizvihttp://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 Memonhttp://www.pakissan.com/livestock (Accessed on 3rd July, 2008)

http://www.pakissan.com/english/issues/how.pollution.shtml

http://www.pakistaneconomist.com/issue2000/issue21/i&e1.htm

http://www.pakissan.com/livestock

http://www.pakissan.com/livestock

http://www.pakistaneconomist.com/issue2000/issue21/i&e1.htm

http://www.pakissan.com/english/issues/how.pollution.shtml

AME-1-Report-Economic of Milk Production in Peri-Urban Areas

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