Pakistan Dairy Farming

Background

With a population of more than 160 million, Pakistan is the sixth most populous country in the world. Despite its high potential for development and economic growth, nearly a third of the country’s population lives under poverty. Literacy rates are at less than 50%, with even lower levels for women. Gender inequalities are prevalent in economic, health care and education. The economy is in a downward spiral, and a spike in global food prices over the past year has hit Pakistan particularly hard with key commodity prices increased by up to 40%. These problems have been compounded by the political unrest and rapidly deteriorating security situation in the country.

Livestock is one of the leading sub-sectors of agriculture in Pakistan, engaging between 30 to 35 million people in rural areas who derive up to 40% of their incomes from the sector. Within the livestock sector, milk is the largest and single most important commodity. The estimated annual milk production in 2004-2005 was 29 million tons, making Pakistan one of the world’s top milk producers. The demand for livestock products is increasing due to population growth and urbanization. Based on a 3% growth rate reported for milk in 2006, the demand was projected to grow by at least 5% for the proceeding years leaving a significant gap in the supply and demand situation. This gap is currently met by imported powdered milk.

Approximately 80% of the milk is produced in rural areas. According to the 2006 Livestock Census, 51% of the 8.4 million reported dairying households own a herd size of only 1-4 animals, and 28% a herd of 5-10. The majority of these producers are the landless or small land holding farmers who constitute the largest contributors of milk production in the country. It is estimated that 30% to 40% of milk produced in the rural areas is marketed through a complex marketing chain consisting of multiple layers of intermediaries. Small dairy farmers are faced with a number of daunting challenges that hamper their production and profitability. Included among the major problems are low productivity due to poor breeding and non-existence of proper veterinary services, lack of an organized marketing system, market exploitation, lack of access to appropriate financial services, and a lack of infrastructure (cold storage equipment etc). In the rural areas, small farmers carry out production and marketing of milk on an individual basis resulting in a limited selling capacity and lack of access to distant larger markets. The non-existence of interconnected cold chains further restricts the marketing potential which is primarily due to the high capital costs of cold chain equipment and high power tariffs, and/or non-existence of a reliable power supply. It is estimated that some 15% to 20% of the total milk produce is lost due to non-availability of cold storage facilities in some areas.

The districts of Naseerabad, Jaffarabad and Jhal Magsi are located at the North-eastern edge of Balochistan bordering Punjab and Sindh, and are home to nearly 150,000 families. Unlike much of Balochistan’s arid and rugged territory, this area is irrigated by two major canals. The major sources of livelihoods in the area are crop-based agriculture and dairy production. However, it is estimated that more than 75% of the farmland is owned by the tribal chiefs and their close family members and a vast majority of the farmers work as tenants. A recent assessment by Mercy Corps in Jaffarabad District estimated, on average, that each farming family sells nearly 70 litres of milk every month, which is about 40% of their average total monthly income. During the assessment, the problem of storage and transportation were noted as the major factors inhibiting their selling capacity, which could be increased by 15-20% by setting up a collection, cold storage and retail chain owned and managed by the producers. The need for cold storage can be further highlighted by the fact that day-time temperatures in the target area often reach 50 Celsius in the summer months.

The pilot project aims at increasing the efficiencies of production, collection and storage at the origins, and improved storage and sales in the market.

Program

The proposed pilot project aims at increasing incomes of landless and small dairy farmers in remote areas of Balochistan. This will be achieved through increasing livestock productivity and improving the economic performance of the dairy value chain in which smallholder dairy farmers will integrate and benefit. The project will specifically address needed improvements in livestock health and management and will enhance the performance of the local dairy industry. Mercy Corps will, through the establishment of Milk Producer Group (MPGs), set up collection and cold storage units and a retail outlet and will provide business planning and skills development in addition to creating sustainable market linkages between buyers and sellers. In addition to the production, marketing, and business skills gained by project participants, a Savings and Loan (S&L) function will be a prerequisite service of MPGs, which will ensure the sustainability and replicability of this model.

Accomplishments

At least 10% increase in milk production as a result of improved animal management practices.
At least 20% increase in sales due to efficient transportation and cold chain (which stops losses of spillage and product turning sour)
At least 10% increase in household incomes
By the end of the project, the MPG-established retail outlet is making profit after the required cost share is paid off

Budget

The total budget for the program is $50,000.