OUTLOOK OF BUFFALO DAIRY FARMS IN PAKISTAN
Prepared by Syed Shakil Amjid & Muhammad Naveed Ul Haq
Asia Dairy Network Working Paper 2
The Asia Dairy Network (ADN) was established in 2012 by the Animal Production and Health Commission for Asia and the Pacific (APHCA) as part of a Smallholder Dairy Development Program supported by the Food and Agriculture Organization of the United Nations (FAO) and the Common Fund for Commodities (CFC). The main objective of this network is to improve the communication between the various dairy industry stakeholders in the Asia region so as to facilitate in the sharing of knowledge and experiences. The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of ADN, APHCA, FAO and CFC concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The mention of specific companies or products of manufacturers, whether or not these have been patented, does not imply that these have been endorsed or recommended by ADN, APHCA, FAO and CFC in preference to others of a similar nature that are not mentioned. The views expressed in this information product are those of the author(s) and do not necessarily reflect the views of ADN, APHCA, FAO and CFC
Acknowledgements We are thankful to Ms. Steffi Wille of European Dairy Farmers (EDF) and her team for extending her support in data analysis.
FOR CORRESPONDENCE , PLEASE CONTACT : Corresponding Author Name: Syed Shakil Amjid Email:
[email protected] Phone: +923008407924
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OUTLOOK OF BUFFALO DAIRY FARMS IN PAKISTAN
Prepared by Syed Shakil Amjid* & Muhammad Naveed Ul Haq** *Zonal Manager, Milk Procurement & Dairy Services Haleeb Foods Pakistan. **Assistant Professor, Department of Animal Production, University of Veterinary & Animal Sciences, Lahore, Pakistan.
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Abstract This paper presents a brief situation analysis of typical dairy farm in Pakistan showing that lower capital investment (sheds, machinery etc.) and operational expenses (cheaper feeds, family labor etc.) are a source of competitive advantage for Pakistan dairy farms. The paper then argues that poor economic growth and growing production costs are imposing huge burden on dairy farmers. For instance, Feed prices have increased by over 50% in recent years making the profits to reduce significantly. The challenge is no doubt big and can only be addressed by addressing productivity constraints so as to be able to capitalize on that the lower capital investment and non-operational costs of milk production in Pakistan.
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Contents Acknowledgements........................................................................................................................................ i Abstract ........................................................................................................................................................ iii Introduction .................................................................................................................................................. 1 Data Collection & Interpretation Methods ................................................................................................... 1 Milk Production & Disposal Trends ............................................................................................................... 2 Farm Land Use .............................................................................................................................................. 2 General Management Outlook ..................................................................................................................... 3 Herd Management .................................................................................................................................... 3 Feeding...................................................................................................................................................... 4 Capital Investment Analysis .......................................................................................................................... 4 Operating Expense Analysis .......................................................................................................................... 5 Entrepreneurial Returns ............................................................................................................................... 6 Current Situation, Challenges & Future Options .......................................................................................... 6 References .................................................................................................................................................... 9
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Introduction Agriculture is the second largest sector of Pakistan, contributing nearly 21% to the GDP and absorbs almost 45% of entire labor force in the country. Livestock is the major shareholder within the agriculture sector; having 159 million heads of animal population, it contributes 53.2% to the agriculture value-added, and continues to grow at the rate of 4% annually. Among all livestock products milk is the most vital as it provides relatively inexpensive and easily available animal protein and minerals (Bilal & Ahmed 2004). Annual gross milk production in Pakistan has reached 45 million tonnes. Buffaloes contribute almost 60% to total milk production in Pakistan (Ministry of Finance 2009). World buffalo population has touched 188.3 million heads. According to an estimate 97% of total buffalo population is found in Asia. After India, Pakistan with 30.8 million heads has the highest buffalo population in the world. It has the low-input -low-yield production systems, animals are mostly fed crop residues and straw based diets; whereas, occasionally supplemented with some concentrate feeds(FAO 2010)(Bilal &Hameed 2009). Because of high butterfat constituents in milk, buffaloes are consumer’s choice all over the country (Cain et al. 2007). Punjab province enjoys well developed canal system and five rivers passing through, make it natural habitat of buffaloes. Almost 60.8% of Pakistan’s buffalo population resides in Punjab province (Afzal 2006). Typical farms in Punjab comprise of 2-6 hectares of land and a herd of 210 animals (Cain et al. 2007). According to Pro-Poor Livestock Policy Initiative, the rural farms with 10 animals are becoming more common in Punjab, and these medium type farms have the capacity to transform into commercial entities (Garcia et al. 2003) yet major problems like poor genetic potential, low quality feeds, high risk of diseases, volatile markets, burden of non-productive animals, lack of technical expertise etc.(Sarwar et al. 2002); are not well documented in terms of economic parameters. The farm data recording and analysis system is poor to provide any reliable picture of the system to the stakeholders. Hence, one could neither know nor predict the economic situation of buffalo farming system. Present study targets medium size dairy buffalo farms in Punjab to give a better economic picture for enhanced understanding as these farms have the potential to convert into viable business units in near future.
Data Collection & Interpretation Methods For data collection, nearly 150 farmers were visited and 26 representative farms were selected on the criteria as follows: 1. Farmers have at least informal records in their expense books etc. 2. Farms represent typical situation in Punjab 3. Farmers are willing to share their income related details Requisite information was collected through face-to-face interviews with farmers, consultation with farm records and visit to the barns for the period of June 2008 to June 2009. Entire cost related data was converted into Euro (€) and total milk production was harmonized to energy corrected milk at 4% fat and 3.4% proteins. Calculated values of dairy enterprise were divided by ECM of milk calculated. 1
Questionnaire and Cost of Production (COP) analysis model of “European Dairy Farmers” was used for data collection and interpretation. Whereas, data on current situation of Pakistani dairies, was taken from historical trends and contemporary resources.
Milk Production & Disposal Trends The herd size had direct impact on the gross production of the farms and averaged to 19 animals per farm; strengthening the fact that region’s milk production is still based on higher number of animal and not the production per animal. Milk production was observed to be around 2,702 kg ECM per buffalo; fat and protein were recorded 6.50% and 4.22%, respectively. On an average 50 tons of energy-corrected milk (tECM) was produced in the accounting period with a range of 16 - 81 tECM per farm. Figure 1: Milk Disposal trend at Buffalo Marketable milk production stood 50 tECM and actual marketed produce was farms (%) recorded as 43 tECM. These findings Marketed Milk Used at Farm Wastages revealed that nearly 4 tECM was used at the farm and about3 tECM was wasted in the pre-marketing processes (Figure 6% 1). 8%
Similar results were reported in a study conducted by FAO in 2003 in Punjab, Pakistan, rural farms with average of 10 buffaloes produced 2,257 kg ECM and sold almost 90% of their milk produced (Garcia et al. 2003). However, some Indian farms having 6 Murrah buffaloes, produced 1,437 kg ECM for the accounting period that was much lower than the production records of Pakistani Nili-Ravi buffaloes (Saha et al. 2004). Production on all farms was round the year and no seasonal trends were observed.
Farm Land Use
86%
Figure 2: Land Ownership (%) Self
Rented
3%
Total farm area averaged 7 hectares; land renting trends were not very high and only touched 0.21 hectares per farm (Figure 2). However, the area being used for forage production was 2 hectare. All the land was arable and no permanent or temporary grasslands were available. Stocking rate was fairly higher (10 buffaloes per hectare) and land productivity averaged 26,265 2
97%
kg ECM per hectare (Figure 3). Working paper on Pakistan’s small producers supports our findings; stocking rate remained 9 to 13 units per hectare. But the milk production was reported to be 15,495 kg ECM per hectare (Garcia et al. 2003). The higher values in present study might be due to the latest advances in agronomic practices and modern feeding trends. Dairy farms in Bangladesh were found with similar trends of not renting lands for agricultural systems while, per farm area ranged between 0.40-1.44 hectares. The stocking rate in Bangla farms was as high as 14 animals per hectare and production in rural dairy farms was recorded to be 25,454 kg ECM per hectare (Hemme et al. 2004). Indian farms in Orissa showed a trend of using up to 0.23 hectare of land for dairy production with a stocking rate of 6 units per hectare. Milk production was found to be 7,709 kg ECM per hectare (Saha et al. 2004); this lower production as compared to Pakistan might be due to genetic differences in the dairy animals of respective countries.
Figure 3: Land Use Fodder Use
Crop Use
Stocking Rate
10
10 9 8 7 6 5
5
4 3 2
2
1 0
General Management Outlook
Land Use (ha)
Herd Management Regional studies indicate that calves at typical buffalo farms are still a secondary product and poor management practices often not only lead to higher mortality but also affect their growth rate. India and Bangladesh have a culling rate between 10-30% and 15-25%, respectively. Whereas, calf loss of 20% (Saha et al. 2004) clearly indicates the real story behind. Delayed puberty, poor conception rate and higher age of parturition are direct result of poor feeding practices. Table 1 Selected herd indicators on dairy farms in Pakistan Herd indicators Months Age at first calving Days Calving interval % Culling rate Kgs per culled-cow Lifetime yield % Calf loss Times per day Milking Frequency
3
37 443 6.6 17,287 9 2
The reason for differences from earlier studies in culling might be due to the level of study as the present study was conducted on medium size farms where commercial trends were evident, hence; better care of calves leading to long productive life of buffaloes was observed. Feeding Buffaloes all over the subcontinent are kept under poor feeding conditions. They are fed roughages and occasionally concentrate (Table 2). Table 2 Buffalo feeding observation Parameters Units Hectares Feeding on grazing at pastures Kgs per day Concentrate feeding Kg ECM Milk from concentrate concentrate
Observation No pastures
per
Kg
3.3 2.2
of
Fodder mixed with wheat straw was offered and as concentrate source, cotton seed cake was commonly used. Similarly in India, grasses with paddy straw were found commonly used for fill effect and rice broken, gram kernel and rice bran were commonly being used as concentrate (Saha et al. 2004). Bangladesh farms showed similar trends to India as paddy and its byproducts were commonly available for feeding (Hemme et al. 2004)
Capital Investment Analysis The investment in different segments was different. However, a general situation observed is given as under, to harmonize results, costs have been calculated in terms of € per cow (Figure 4). Livestock investment was primary and major cost, observed. Whereas, building costs were very low, essentially translating into the fact that poor housing management and open yards were used for livestock keeping. Similarly, no significant investment on milking machines and other equipment was done. Contrary to the situation, Capital input reached to 5,291€ per cow in European farms (Wille et al. 2009). Differences were due to the mechanization and improved farming in European farms versus traditionally maintained low investment farms in Punjab, Pakistan. A
Figure 4: Capital Cost Machinery
Livestock
Building
Others
828
244 122
87 Euros/Cow
Figure 5: Capital Investment Share Machinery
Livestock
19%
Building
9%
7%
4 65%
Others
percentage of capital utilization is shown in Figure 5.
Operating Expense Analysis Costs at dairy farms may be divided into 2 distinct groups, direct costs (involving expenses directly on dairy animals) and indirect costs (labor, machinery, building, depreciation and miscellaneous costs). Table 3 Dairy farms Expenditure Type of Costs Purchase of animals Animal health, hoof trimming Insemination, ET Other direct costs of animal production Seeds Fertilizer Pesticides Other direct costs of fodder production Total direct costs Personnel expenses Calculated cost for family labour Contract work, leasing of machinery Fuel, lubricants Energy Depreciation of machinery and vehicles Opportunity costs for machinery and vehicles Total labor related costs Depreciation of buildings and installations Opportunity costs for buildings and installations Total costs for buildings Renting land Opportunity costs for land Taxes and fees related to land Total costs for land Other costs Total of costs
5
€ per100kg ECM 3.455 0.422 0.117 2.524 0.985 3.684 0.732 0.330 12.249 5.434 0.001 1.485 0.922 0.127 0.250 0.191 8.410 0.176 0.143 0.319 0.196 2.893 3.089 0.066 24.134
Amongst all aforementioned costs, cash costs remained at the highest followed by the opportunity cost and the depreciation cost respectively. Reasons of low in depreciation cost are the lesser capital input in terms of machinery and buildings (Figure 6).
Figure 6: Operating Cost Share (%) Cash
Opportunity
Depreciation
2%
Total costs in European farms remained 41.5 € per100 kg ECM (Wille et al. 2009) and was higher in all cost components due to advanced farming systems.
20%
Entrepreneurial Returns
78%
Milk remains the major income source of farms with average farm income of 44.6 € per 100Kg ECM. Other inflow calculated included the animal returns, income from renting assets to nearby farms and others. The milk returns were capped at 37.91 € per 100 kg Figure 7: Returns Structure (%) ECM (Figure 7). Milk
Consequently, in 2008-09 some 20.47 € per100 Kg ECM was being earned by most dairy buffalo farmers in Pakistan.
Animal Sales
2% 4%
Renting Assets
9%
Current Situation, Challenges & Future Options The Milk price has been declining for the last 4 years in Pakistan (Figure 8). Year 2011-12 was relatively better in terms of price offering with average of around 0.36 €/Liter. The major reasons were cheaper production of SMP and its import from neighboring countries like India.
6
85%
Others
Figure 8: Milk Price Trend 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2010-11
2011-12
2012-13
2013-14
Input costs ranging from direct, indirect and opportunity have gone higher. Animal feeds (generally covering 70% of operating expense) take corn as a major ingredient and its price is a general indicator of overall feed costs. The corn prices have gone as much as double over the year 2009-2013 (Figure 9). Figure 9: Corn Prices (2009-2013) 30000
250
25000
200
20000
150
15000 100
10000
50
5000 0
0 1
2
3 Euro/MT
4
5
PKR/MT
Above situation is alarming as no significant improvement has been observed in milk production potential and farming trends but the prices have doubled in the meantime with a noticeable decrease in milk price. Presently, the farming community is operating at minimal profit margin and may fall prey to the negative margins. A good factor is that capital investment and non-operational costs in Pakistan are relatively low, compared to contemporary industries of other regions. On the other hand lower production per animal is the most serious concern and needs to be addressed by better utilization of feed resources and adoption of improved husbandry practices. 7
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References Afzal, M., 2006. Investment opportunities in livestock sector in Pakistan. The News. Bilal, M. & Ahmed, A., 2004.Dairy hygiene and disease prevention, Usman and Bilal Printing Linkers Faisalabad, Pakistan. Bilal, M. &Hameed, A., 2009.Survey of buffalo management practices at farmers' level.In 6th Asian Buffalo Congress. Lahore, Pakistan. Cain, P., Anwar, M. &Rawlinson, P., 2007.Assessing the critical factors affecting the viability of small-scale dairy farms in the Punjab region of Pakistan to inform agricultural extension programmes. Agri. Sys, 94(2), 320-330. FAO, 2010.A summary of milk production across the world, FAO. Garcia, O., Mahmood, K. &Hemme, T., 2003.A review of milk production in Pakistan with particular emphasis on small scale producers, FAO. Hemme, T., Garcia, O. & Khan, A., 2004.A review of milk production in Bangladesh with particular emphasis on small scale producers, FAO. Ministry of Finance, 2009.Pakistan economic survey 2009-10. Available at: http: per perwww.finance.gov.pk persurvey_0910.html [Accessed February 15, 2011]. Saha, A., Garcia, O. &Hemme, T., 2004.The economics of milk production in orrisa, India, with particular emphasis on small scale producers, FAO.
Sarwar, M. et al., 2002.Dairy industry in Pakistan, a scenario.Int. Journal of Agri. and Bio., 4(3), 420-428. Wille, S. et al., 2009.EDF report 2009, Germany: European Dairy Farmers.
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