Dairy Plan

DAIRY DEVELOPMENT PLAN FOR
BHUTAN
• Interim Report – 20 July, 2010
Not to be cited or quoted

DG, Tashi, Jigme, Roger, Antony, Ibrahim
Dairy Development Division
Department of Livestock,
Ministry of Agriculture and Forestry,
Royal Government of Bhutan

Thimphu, Bhutan
July, 2010

Table of Content
Abbreviations________________________________________________________i
Foreword___________________________________________________________ii
Acknowledgements____________________________________________________iii

Acronyms and Abbreviations ____________________________________________ 3
Executive Summary ____________________________ Error! Bookmark not defined.
Conclusions __________________________________ Error! Bookmark not defined.
1.

Background to the Study _______________________________________ 10

Objectives of the Dairy Development plan _____________________________ 10
Methodology_______________________________________________________ 10
2.

Overview of the Dairy Sector ___________________________________ 12

Problem Analysis and Constraints ____________________________________ 12
Trends in Dairy Production, Imports and Demand ______________________ 13
3.

Dairy Production Systems ______________________________________ 14

Main Production Zones ______________________________________________ 15
Cattle population ___________________________________________________ 16
4.

Dairy Economics and Markets __________________________________ 21

Economics of Dairy Production _______________________________________ 21
Milk Collection, Processing and Marketing _____________________________ 24
Milk processing ____________________________________________________ 24
Milk and Dairy Product Consumption patterns?? _______________________ 26
5.

Policies and Institutional Support (Roger/Ibrahim) ________________ 26

Government Institutions Supporting the Dairy Sector ___________________ 26
Private Sector Institutions for Dairy DevelopmentError! defined. 6.

Bookmark

not

Recommendations _____________________________________________ 26

Recommendations for policies and institutions _________________________ 26
Recommendations for production systems _____________________________ 28
Recommendations for economics and markets __________________________ 29
7.

The Dairy Development Plan____________________________________ 31

References ___________________________________ Error! Bookmark not defined.

Acronyms and Abbreviations
AEO
AEO
AHS
AI
AMEPP
AMS
BLSS
CLO
CMO
CSO
DDP
DLO
DOL
EC
EU
EZAP
FAO
FCB
GDP
GNH
GNP
HTST
IDPE
IFAD
IMS
LEO
LHS
LPS
LSS
MCC
MPU
MOAF
MDG
n.a.
NFFDP
NLBP
NPO
NPV
NRTI
NSB
Nu
PAA
PAR
PCS
PG
PO
PPD
PUMB

Agricultural Extension Officer
Assistant Extension Officer
Animal Health Supervisor
Artificial Insemination
Agricultural Marketing Enterprise Promotion Project
Agricultural Marketing Services
Bhutan Living Standard Survey
Chief Livestock Officer
Chief Marketing Officer
Central Statistics Organisation
Dairy Development Plan
District Livestock Officer
Department of Livestock
European Commission
European Union
Eastern Zone Agricultural Project
Food and Agriculture Organisation
Food Corporation of Bhutan
Gross Domestic Product
Gross National Happiness
Gross National Product
High Temperature Short Time
International Development Policy Establishment
International Fund for Agricultural Development
Information Management Section
Livestock Extension Officer
Livestock Health Supervisor
Livestock Production Supervisor
Living Standards Survey
Milk Collection Centre
Milk Processing Unit
Ministry of Agriculture and Forests
Millennium Development Goal not available
National Feed and Fodder Development Programme
National Livestock Breeding Programme
National Programme Officer
Net Present Value
National Resource Training Institute
National Statistical Bureau
Ngultrum
Poverty Assessment and Analysis
Poverty Analysis Report
Planning Commission Secretariat
Poverty Gap
Programme Officer
Policy and Planning Division
Peri-Urban Milk Booth

RGOB
RNR
SLOT
SLSP
SLO
SPO
TCC
UNICEF
UNV
US$
VAM
WFP
WTO
WWMP

Royal Government of Bhutan
Renewable Natural Resources
Shari Lothuen Omgi Tshikpa (Shari Cooperative Members’ Milk Society)
Support to Livestock Sector Project
Senior Livestock Officer
Senior Planning Officer
Tashi Commercial Company
United Nations Children’s Fund
United Nations Volunteer
United States Dollar
Vulnerability Analysis and Mapping
World Food Programme
World Trade Organisation
Wang Watershed Management Project

Summary
Policy:
1. There is immense scope to increase milk production in Bhutan to meet the present and future increasing demand for milk and milk products and more importantly to reduce imports of milk products. In doing so farm incomes can be increased, and could lead to creating employment opportunities in the dairy sector. 2. In the 10th Five Year Plan, the Ministry of Agriculture has formulated the concept
‘One Geog Three Products’ or ‘OGTP’. This approach identifies up to three agricultural products in each Geog based on market, access and production potentials in order for the central department and regional centres of the MoA to direct RNR interventions, technical support and investments to specific products in appropriate locations. Milk and milk products has been identified as one of the three products in 86 of the 205 Geogs.
3. The formation of marketing and/or processing groups is a successful model and should be further supported. However, priority should be to strengthen the existing groups rather than setting up new groups.
4. The DoL has played a key role in stimulating, forming and supporting farmer groups. The success and developments in this venture are a direct result of
DOLs interventions.
5. In the recent past, the private sector (both companies and entrepreneurs) perceive opportunities in the Dairy sector and are willing to invest in the sector
(Zimdra , Kinley Penjor). It is imperative that DoL should not only actively encourage these venture, but also pave the way for smooth operationalization of these investments
6. There have been significant improvements in dairy husbandry and management practices, especially in terms of lower numbers of males in dairy herds and the increasing percentage of cows in milk (from about 17% of the herd in milk in
2000 to about 19-23% in 2008).
7. Poor keeping quality of fresh milk is a serious concern among farmers and also with MPUs. This could be attributed to unhygienic milking conditions, time taken to deliver the milk to collection centres due to remoteness and road conditions, lack of chilling/cooling facilities, and adulteration with unclean water.
Preservation of milk by chilling/heating would involve investments or by addition of preservative such as lactoperoxidase would be a policy option which
DOL has to make.
8. Recently NLBP together with Dr. Thorpe (consultant/EU-SLSP) prepared a draft Livestock Breeding Policy which needs to be endorsed and formulate strategies for its implementation.

Organisation Structure:
9. The proposed DOL structure includes the creation of the Dairy Development
Division (DDD) but its modus operandi is unclear.
10. Lack of good-quality feed and poor milk yield from indigenous breeds of cattle have been identified as key constraints to dairy development. Under the existing structure, NFFDP and NLBP are programs which should address the above constraints. However the role, functions and position of the NFFDP and NLBP within the DDD is not clear.
11. Lack of subject-matter specialists in various disciplines of the livestock sector
(animal nutritionists, animal product technologists, dairy technologists, agrostologists, genetics and breeding, reproductive physiologists, animal management and welfare, livestock economists, biometrician/statistician), greatly hampers research and development activities of these sectors.
Livestock data:
12. There are 2 data sources (i) annually from DOL which is based on information obtained from the geogs and (ii) 5-yearly from RNR which is based on agriculture census.
13. Projections based on these 2 data sources are significantly different.
14. Based on DOL data for 2000 to 2008, the annual growth rate of local and improved cattle numbers is estimated at -0.1% and 8.5%, respectively. This is due
1

2

mainly to the large increase in cattle numbers from 295922 in 2004 to 338847 in 2005.
15. Based on the agriculture census data for years 2000 and 2008, the annual growth rate of indigenous and improved cattle numbers is estimated at -1.5% and 5.5% respectively, which is used for milk production projections in our report.

Market/Marketing surveys:
16. The major institutional constraints to increasing livestock productivity are marketing. 17. A key constraint to dairy development is inefficient marketing mainly due to lack and/or ably functioning farmer organization, low volumes traded, long distance, poor roads, limited transport and inadequate competition.
18. There is considerable scope to reduce marketing costs and increase margins. But product quality needs to be maintained.
19. Studies of Marie Derville and Graham Dixie provide some insight to the current and future supply and demand of milk and milk products. These projections however are based on DOL 2000 to 2005 data which are considered to be biased or unrepresentative, for example the annual growth rate for indigenous is around
-2.2% and that for improved is around +21%
1
2

(251760 (indigenous) + 44162 (improved)
278535 (indigenous) + 60312 (improved)

20. Well-planned and properly-executed market/marketing surveys to capture current and future supply, demand (including consumer preference) and valuechain analysis (including institutional structures and price structure/formation) of milk and milk products are unavailable.
21. Based on market survey findings, there will be a need to identify ways of detecting gluts and take a proactive approach to stimulating demand for specific products 22. Institutional structure influences price structure and resource allocation. Prices that farmers receive and the quantities they can sell are dependent upon performance of organizations above them in the marketing chains. The institutional structure of these chains should therefore be considered in the financial/economic analysis of dairy-product markets.
23. There is wide scope to enhance consumption of milk and milk products among the Bhutanese population by educating especially the children on the nutritional value of milk and its products, and also by diversifying and introducing new products (flavored milk, drinking yoghurt, milk toffees, and ice cream).

Farmer groups:
24. Milk producers are small-scale and scattered so group marketing and processing is appropriate.
25. Good successes from approximately 40 groups indicating that there is a market for fresh milk and that producers will increase production if they have a guaranteed market (through a Farmer group).
26. Most dairy groups are in the EAST where milk production is highest and prices lowest. 27. Second highest production is in the WEST but few groups and milk price the highest. 28. Indications are that farmers can increase milk production if there is demand and
(easy) market.

Milk and milk products:
29. National milk production for 2009 is estimated at 25,000 t, and projections based on milk production of 800 litres per year per improved cow, indicates that it will increase to 32,000 t in 2025. At these levels of production, per capita availability would range from 38 kg in 2009 to 45 kg in 2025.
30. Under better quality feeding regimes, the improved cows should be able to produce 2100 litres/year, which should increase the national milk production to
63,000 t in 2025. At these levels of production, per capita availability would range from 57 kg in 2009 to 83 kg in 2025.
31. Realisation of this potential would contribute significantly to meeting domestic demand which is due to increase rapidly mainly because of urbanisation and expected increased tourist arrivals.

32. Recommended per capita consumption is estimated at 73 kg per annum, based on FAO/WFP data.
33. 2022 could mark the turning point when domestic production and imports would be sufficient to meet total demand with (i) domestic production supplying 93% of demand and (ii) imports supplying 7% of demand.
34. 2025 could mark the turning point when domestic production of milk would totally meet (without imports) its domestic demand based on an annual improved cow yield of 2100 litres/year.
35. It is likely that the financial returns to yoghurt production would be higher than those from fresh milk in areas where there is yoghurt demand within the district and adjoining districts.
36. Most farmers convert some fresh milk into butter and cheese because (i) these are part of the traditional home consumption diet (ii) of the need to extend shelflife (iii) they are easier to transport and (iv) there may be a high risk of having fresh milk unsold in the market.
37. Many farmers/farmers groups earn higher financial returns to labour-day from selling fresh milk than from selling cheese and butter.
38. A MPU for fresh milk production to be economical should handle above 200 l/day. 39. High amounts of milk powder are imported as compared with liquid milk, cheese and butter. In 2007, the imports (in t) of milk powder, liquid milk, cheese and butter were 2093 (about 16,000 t milk), 1465, 401 and 243, respectively, and in
2008 the imports were 1904, 1031, 546 and 244.
40. Chugo (hard cheese) has a future (to meet local demand and may be export) but needs further investigation In terms of consumer preference, quality etc.
41. Bumthang/Gogona type Gouda cheese has limited demand within Bhutan.
Attempts to increase production of this type of cheese need to be carefully assessed in terms of export potential and competition with similar cheese types from other countries.
42. Yoghurt production at the Thimphu DOL plant is financially profitable with a positive net present value.
43. Where there is a market for fresh milk it is more profitable to sell fresh milk than to produce and sell butter/cheese. However, if there is no market for fresh milk then producers need to make and sell butter/cheese.

Training:
44. Training of staff at HQ on practical aspects of dairy product processing is needed to train, backstop and provide guidance in managing the existing MPU’s.
45. Hygienic-milk production is a concern. Extension staff training is needed on milk hygiene and quality and these staff in turn will train farmer groups.
46. Practical hands-on training programs on dairy cattle nutrition and feeding strategies have been conducted for the DLOs, feed and fodder focal persons at geog level. Similar trainings are needed for farmer groups.

Research & Development:
47. There is a need to establish a R&D section for value-addition of milk and milk products since value-addition is the key to development of the dairy sector.
48. Adopting quality standards for datse and improving its packaging could enhance consumer acceptability.

1. Background to the Study
The initiative for this study arose from a shared interest by the Department of Livestock,
Ministry of Agriculture & Forestry, and the EU – Support to Livestock Project, to review progress in the Bhutan dairy sector with a view to identifying strategies and prepare a Dairy Development Plan for continued development.
Series of meetings with DOL staff was held to further the implementation of this idea.
At these meetings, a number of priority issues to be addressed through the study were identified. It was agreed to concentrate on cattle as it contributes to a significant quantum of the fresh milk produced. The approach is based on the Conceptual
Framework for Dairy Development and Research, which addresses the entire consumption-to-production spectrum within dairy systems. A final debriefing meeting was held in Thimphu on July 2, 2010, at which findings and recommendations were presented and discussed.
Objectives of the Dairy Development plan
As agreed at the initial meetings with the DOL staff, the overall objective was to bridge information gaps to assist and accelerate dairy development in Bhutan with the view to drastically reduce the dependency of milk and milk products imports, in doing so identify priority development and interventions.
The specific objectives were to:
1. Highlight the nature and distribution of dairy production, processing, marketing and consumption in each district;
2. Identify the potential for further development of the dairy sector and the primary constraints which impede the potential; and
3. Suggest areas that should be targeted for investment, policy and technological interventions and research in support of the development of the dairy sector;
4. Prepare a dairy development plan for Bhutan
The main areas targeted for the study were the zones typically used in differentiating agricultural systems in Bhutan.
Methodology
The methodology used in this study was based on ILRI’s Conceptual Framework for
Dairy Research (Rey et al., 1993), further refined through Dairy Rapid Appraisals carried out by ILRI in Sri Lanka, Uganda and Tanzania. The approach centres on the principle that viable dairy systems are necessarily demand-driven (Error! Reference source not found.). Thus the focus is on market-orientation, and the analysis begins by considering current and potential market demand, as any significant expansion or development of the dairy sector will depend on effective demand. Further, given that dairy systems are shaped by the interaction of technology, economics, and policy, an interdisciplinary approach is needed.

Critical to generating new insights and information that are not simply a repetition of previous assessments, is a willingness to challenge prevailing notions among the development and research stakeholders in the dairy sector. This approach was taken with a view towards testing current presumptions against the available facts, as their validity may be undermined by contrary evidence, or because the dynamics of the sector have rendered them outdated.
The study was carried out during May to July 2010. It composed of the following parts:
a. Review of previous studies and secondary information on the dairy sector
b. Participatory Rapid Appraisal or rapid qualitative survey by the study team of the main production and consumption areas to carry out interviews with farmers, market agents, and other expert informants, in order to gather qualitative information. c. Also, the previous appraisals carried out by the EU-SLSP consultants were incorporated. Figure 1. Conceptual framework for the appraisal of dairy systems
A final stakeholder consultation workshop is scheduled to take place in Aril 2011, where the Dairy Development Plan for Bhutan will be presented to a variety of stakeholders
(producers, consumers, processors, farmer associations, policy makers, market agents) with the view of arriving at consensus and pave the way to prepare a roadmap for its implementation. 2. Overview of the Dairy Sector
There is immense scope to increase milk production in Bhutan to meet the present and future increasing demand for milk and milk products and more importantly to reduce imports of milk products. In doing so farm incomes can be increased, and could lead to creating employment opportunities in the dairy sector.
In the 10th Five Year Plan, the Ministry of Agriculture has formulated the concept ‘One
Geog Three Products’ or ‘OGTP’. This approach identifies up to three agricultural products in each Geog based on market, access and production potentials in order for the central department and regional centres of the MoA to direct RNR interventions, technical support and investments to specific products in appropriate locations. Milk and milk products has been identified as one of the three products in 86 of the 205 Geogs.
Problem Analysis and Constraints
The central problem is “Marketing” interlinked with “Low Productivity of the Dairy
Sector”. The problems and issues involved in the dairy sector are inter-related with numerous feedback loops, which are listed and needs to be addressed.
•

It is difficult for farmers to market their produce from scattered households that produce low volumes of milk, in areas where road connectivity is often very poor or nonexistent. •

The key constraint to development of the dairy industry in Bhutan is low productivity of dairy stock and marketing of milk and processed products. Low productivity is largely a function of poor feeding of stock, primarily resulting from low levels of farmer knowledge and understanding of basic animal husbandry / nutrition issues.

•

The greatest constraint in the short-term to expansion of the dairy sector is the availability of good quality dairy stock. Increasing stock availability through improved breeding is a slow process. If there is significant investment in commercial medium- and large-scale dairy farming in the short-term there will be a serious shortage of quality dairy stock.

•

The draft Breeding Policy should be endorsed by RGOB, thereby reinforcing DOL’s commitment to increase the numbers of Jersey and Brown Swiss, while maintaining a viable Nublang gene pool.

•

Access to land for production of livestock forage and fodder is a critical issue if productivity gains in the sector are to be achieved. However access to land alone will have little impact on dairy productivity and profitability unless there is a change in attitude to deliberately growing pasture or fodder for stock.

•

Numerous previous studies have stressed the importance of the opportunity to increase the use of quality forages to improve the nutritional status, productivity and profitability of the herds. The use of high quality forage requires a paradigm shift in thinking for farmers. High quality forage must be deliberately grown and fertilized.

•

The extension service provided by the DOL to farmers is largely ineffective as the number of frontline agents is insufficient for the workload they are supposed to handle. Their work load includes all aspects of animal health, monitoring, evaluation and reporting, leaving little time for livestock extension with production focus. In addition to the DOL extension service, commercial milk processors provide services to their clients (farmers) but these services are focused on milk collection not training and extension.

•

At the District level the livestock sector is given low priority. Emphasis is placed on fund allocation for infrastructure.

•

There is a need to train extension providers in extension methodology as well as on various aspects of animal husbandry.

•

Growth in the informal market is likely when the imported retail milk powder prices increase and fresh liquid milk becomes more competitive. That growth will probably continue, partly at the expense of the formal sector, until the formal market of liquid milk is better able to reach consumers. Many in the sector see a lack of small-scale processing as constraining farmer’s opportunities for obtaining higher prices for their milk. Trends in Dairy Production, Imports and Demand
Fresh milk consumption is uncommon among the Bhutanese, except in the south and some parts of western Bhutan, where a certain proportion of fresh milk is used for preparing sweet tea or occasionally for fresh consumption especially for children.
The quantity of milk and milk products imported during the period 2001 to 2008 is shown in figure below.

The major proportion of milk produced in the country is processed into butter and cheese, which form a substantial part of the Bhutanese diet. The butter is mostly used for preparing the salted butter tea (suja) that is commonly consumed by the majority of the
Bhutanese population and the cheese is used as an important ingredient in almost all
Bhutanese curries. Some processed cheese (mostly imported) is consumed direct.

3. Dairy Production Systems
Most of the people in the Bhutan are rural based and rely heavily on livestock particularly dairy for satisfying the household nutritional needs and on direct income through the sales of milk and milk products, and indirectly on savings achieved through use of cattle and buffaloes for draught power and fertilizer through manure for intensive cropgrowing. Livestock assets also provide a critical source of insurance and financing for smallholders who have little access to financial services. Livestock also provide highquality nutrition for families, and are a key means of income generation for women and the landless. Livestock livelihoods are not only found on farms. The traditional markets that dominate the livestock industries have been shown to be a large source of employment for both rural and urban poor.
Markets pull and push factors such as pricing and payment practices can have an effect on milk availability. The distance between source and sales areas, or the density and scale of the production system, without product processing can also increase the number of intermediaries, due to the need for assembling, bulking, transporting and distributing.
The number of intermediaries involved will have a bearing on both producer and consumer milk prices.
The shorter the channel the more likely that the consumer prices will be low and the producer will get a higher return, however it will depend on whether it is subsidized. In response to these changes and opportunities there is a need for a more market-oriented risk based approach to dairy development which firmly positions the smallholder farmer/group as the client beneficiary with decision making powers.
Smallholders can still compete, particularly when they are effectively linked to formal, vertically-integrated markets.
•

•

•
•

Key to exploiting these demand opportunities are smallholder marketing linkages to formal private sector companies through various institutional arrangements and nongovernmental organizations, thus diversifying from the informal markets they generally depend on.
Organizing farmers and providing technical support, training, health and feed services, and the promotion of central collection centers to streamline marketing and effectively reduce transactions costs in the value chain.
The situation of smallholder farmers is aggravated by poor physical and institutional infrastructure, limited access to efficient breeding services and current animal
To allow smallholder producers to overcome these barriers and fully participate in achieving near self-sufficiency requires; systematic interventions at farm, market and

policy levels which will combine best available science and strong development experience and expertise.

The other issue is that in spite of the demonstrated role of indigenous raw milk and milk products markets in serving poor producers, in employment generation, and in stimulating dairy development, policies generally do not favour the marketing of such products. To implement that, however public-private partnerships are required to provide the training and certification services needed to maintain raw milk and products quality. Main Production Zones

Agro-ecological zones and Livestock Production Systems
In Bhutan, based on altitude six main agro-ecological zones (FAO, 1996) have been distinguished: alpine, cool temperate, warm temperate, dry sub-tropical, humid subtropical and wet sub-tropical zones (Table 1). This zoning enables to plan and prioritize research and development activities in the fields of agriculture and natural resource management based on the available resources.
Mixed (crop and livestock) farming systems and their interaction with the forest are the most important type of farming systems in Bhutan. Depending on the agro-ecological zones and topographic features, crops or livestock take a more predominant role. For cattle production systems in Bhutan, Samdup et al. (2010) describe three production systems, the extensive (some migratory practices, but they depend mainly on forest grazing without much concentrate feed); the semi-intensive system (forest grazing along with small quantities of concentrate feed) and the intensive systems (sedentary rearing system for exotic cattle and moderate quantities of concentrate feed).
Migratory practices refer to the seasonal movement of herdsmen and their livestock especially up to mountain pastures in summer and back down into the valleys in winter.
In summer (late April to May) herdsmen take their animals to pastures as high as 5000 ft masl and descend in the winter (October) to 2600 ft masl. They respect and follow their age-old traditional migratory routes to which they have traditional grazing rights.
In the temperate and sub-tropical areas the migratory practices are declining although the exact figures are not known. The migratory practices in the alpine areas remain as important as before. Migration occurs for various reasons (MoA, 2001), such as to:
•
•
•
•

address animal feed shortage in the winter; retain ownership of pastures and crop land in the sub-tropical areas; display wealth and status; to prevent registered grazing land from reverting to forests; be able to cultivate crops in lower areas.

Table 1:

Agro-ecological zones of Bhutan

Agro-ecological zone1

Altitude (ft; masl)

Temperature (°C)

Rainfall (mm)

max

min

mean

Alpine

>3500

12.0

-0.9

5.5

< 650

Cool temperate

>2500-3500

22.3

0.1

9.9

650 - 850

Warm temperate

>1800-2500

26.3

0.1

12.5

650 - 850

Dry sub-tropical

>1200-1800

28.7

3.0

17.2

850 - 1200

Humid sub-tropical

>600-1200

33.0

4.6

19.5

1200 - 2500

Wet sub-tropical

150 - 600

34.0

11.6

23.6

2500 - 5500

1

defined according to FAO standards. Source: MoA/ISNAR, 1992

In the temperate areas, important cash crops are potatoes and apples, while cereals like rice, buckwheat, barley and wheat are grown in small quantities. The main subtropical crops are rice, maize vegetables and mandarins, pineapples and bananas. The sedentary livestock production system involves rearing mainly crossbred cattle like Jersey crossbreds and Brown Swiss crossbreds. These cattle are usually stall fed at night and graze in the fodder paddocks or the forest during the day.
Cattle population

Herd growth
Cattle population data as maintained by IMS (DoL) is illustrated below.

Growth rate predictions (Surya, Marie, Dixit, NASL) of the herd based on published data (see figure below) from DoL or RNR census indicate :
• ___________________________________________________________ i ncrease in improved cattle population (8.0 to 9.3%)
• ___________________________________________________________ d ecline in indigenous cattle population (0.9 to 1.3%)

Milk production

Figure: Milk production predictions based on current level of milk production

* 17% of herd in milk, annual milk yield of indigenous cow = 0.4 MT, and annual milk yield of improved cow = 0.8 MT
Figure: Milk production predictions based on improved level of milk production

* 17% of herd in milk, annual milk yield of indigenous cow = 0.4 MT, and annual milk yield of improved cow = 2.1 MT

Breeding policy for Dairy cattle
Extracting milk for home consumption and for sale has been part of Bhutan’s livelihood systems for centuries. Building upon that tradition by increasing extracted milk yields of cattle through crossbreeding with Brown Swiss (BS) and Jersey has been Govt. policy for many years. The result of that sustained Govt. support is the current population of
60,000 dairy cattle, i.e., cattle with Jersey or BS genes. However, despite the ready availability of BS semen and bulls, the breed has not been widely adopted, even in the

higher altitudes where it was promoted strongly. Consequently in 2007 there were fewer than 5,500 “BS”, whereas there were 55,000 “Jersey”, ten times more.
And it appears that another field reality is that households are not content with dairy crossbreds, e.g. a F1 Jersey x Nublang cow or a ¾ Jersey ¼ Nublang heifer (i.e., the
Jersey-sired progeny of a F1 Jersey x Nublang cow), but strive through upgrading to have a purebred Jersey. In part this is a result of the relative ease of accessing purebred Jersey semen and/or arranging a cow to be served by a purebred or high grade Jersey bull. But what are the implications for breeding policy?
The extensive scientific literature on dairy crossbreeding in the tropics supports the
DoL’s current policy of promoting “crossbred cattle with Jersey and Brown Swiss exotic inheritance of 50 – 75 % is most suited to the climatic conditions of the country and the needs of the farmers”. And the policy cautions that “there are evidences (in Bhutan) that cattle with exotic inheritance of above 75 % tend to have higher mortality”. Therefore, given the continuing upgrading to pure Jersey (essentially the breed substitution of the
Nublang by Jersey), clearly there is the need to carefully evaluate the on-farm performances of high grade Jerseys, particularly for the fitness traits: mortality rates preand post-weaning and for young and adult stock, age to first calving, calving interval and infertility rate. The role of the National Cattle Information System (NCIS) will be key to carrying out the evaluation. Ensuring the effectiveness of the NCIS and its feedback mechanism will be a major commitment of the NLBP.
Heat stress and tropical diseases are major factors depressing high grade Jersey and BS performances in the tropics, and neither factor is so influential in the areas of Bhutan where Jersey and BS mainly produce. More important here, based on recorded performances, are the plane and quality of nutrition and the health management of calves and young stock, which are often inadequate. Hence the need to emphasize and better integrate programmes supporting improvements to dairy cattle feeding and health and hygiene management so that the benefits from advantageous genotype x environment interactions resulting from rearing Jerseys and other high yielding breeds can be fully realized. When developing the participatory-based programme, a key element will be learning from and promoting the best practices of successful producers.
These integrated programmes are expected to be developed with the communities participating in the Contract Bull Production Programme (CBPP) and the Contract Bull
Management Programme (CBMP), both of which will be extended – subject to community willingness and commitment- and the recording and feedback through NCIS strengthened. As for the Nublang, the dairy CBMP should draw on the lessons learnt from the recent pilot scheme in Trashiyangtse, including its insurance component.
In parallel with these developments DoL will work towards the private sector delivery of livestock services (e.g. AI and curative veterinary treatments) in areas where commercial dairy production is now well established. Full cost-recovery will be introduced in a phased manner and service delivery privatized, releasing funds and staff for areas with known potential for dairy development.

Feed resources and common properties
Despite about 20 years of activities aimed at production of improved fodder, fodder shortage is still rated the most important constraint on increased milk production and sustainability. The small gain towards meeting the feed requirement has been offset by the increase in livestock population. Land shortages are widely considered to be the single most important limitation to fodder resource development. One view is that land shortages occur because farmers allocate lower priority to fodder development than to cash crops such as apples and potatoes. This in turn can be attributed to dairy farming generating a lower income

Livestock Services
Both the MoAF and DoL have recently undergone restructuring. At the time of writing the final structure of DoL has not been fully approved, but the DoL is likely to be organised into three divisions:
(a) Animal Health Division (coordinated through NCAH),
(b) A new Dairy Development Division (that subsumes NLBP and NFFDP),
(c) Animal Production Division (including meat eggs and fish).
Extension and Research activities are considered to be cross-cutting and are carried out by the Divisions. Livestock Research was formerly coordinated through CoRRB but now reverts to a Department function. The RNRC Jakar is now managed by DoL. DoL manages 19 farms producing day old chicks and pullets, piglets, fingerlings, jersey and brown Swiss bulls, horses etc.
In the 10th Five Year Plan the Ministry of Agriculture is promoting the concept of “One
Geog Three Products” or OGTP. This approach identifies up to three agricultural products in each Geog based on market, access and production potentials in order for the central departments and regional centres of the MoA to direct RNR interventions, technical support and investments to specific products in appropriate locations.
Of the 205 geogs in Bhutan, 86 geogs opt for dairying under the MoA’s OGTP concept;
Cheese and butter – 54, Fresh Milk – 25, Chugo – 3, Fermented cheese - 2, Ice cream –
1, and Fermented cream – 1. In addition, about 25 geogs have milk processing units and dairy farmer groups established, but have not opted for OGTP support.
Breeding and Insemination Services
The Department of Livestock is responsible for breeding policy nationally and manages two liquid nitrogen plants (Yuispang and Kangma). The main centre is at the National
Livestock Breeding Programme Offices at Yusipang, here imported semen is stored for distribution and local semen extracted.

National breeding policy guidelines for cattle, buffaloes, and goats, sheep and pigs were recently formulated with support from EU SLSP to contribute to uniformity of livestock breeding in Bhutan.
Veterinary services
The National Centre for Animal Health is responsible for animal and poultry disease and the production and quality control of some animal and poultry vaccines against diseases of economic importance. These functions are supported through four Regional
Livestock Development Centres (formerly Regional Veterinarian Laboratories). All livestock extension agents are trained to deal with animal health issues. A network of
‘bare foot veterinarians’ (Village Animal Health Workers) provides further back up at
Geog level. There is at least one VAHW in each of the 202 Geogs. Training to these
VAHWs was recently supported through EU SLSP.
Extension and training services
The Department of Livestock is represented in each of the 20 Districts of Bhutan by the
District Livestock Officer, (DLO). While the DLO reports to the DoL for technical matters, his salary and administrative links are through the District. Currently DoL is represented by 205 geog level staff, who are also referred to as feed and fodder focal persons. 4. Dairy Economics and Markets
Economics of Dairy Production
Bhutan’s rural population is static but the domestic market is still expected to increase annually by 10% owing to the expanding urban population and income (IBRD, Graham
Dixie, 2006). The fastest annual growth was reported to be with fresh cheese (both for local and imported products), followed by butter and processed (powdered, condensed and fermented) milk. Dairy imports grew annually at 21% during the period 1997 – 2004, and estimated to currently cost US$ 5.3 m. The growth rate declined however in 2005 to less than 5.4% suggesting that local production may be beginning to meet urban demand.
Import volumes indeed seem to have stabilised at about 2500 MT in 2005.
The domestic market is mainly urban and worth annually US$ 4 m - 7 m to the rural economy but likely to double by 2015 to US$ 13 m (IBRD, 2006; Graham Dixie, 2006).
The dairy-product export market for urban Assam is expected to grow from US$ 0.7 m in 2005 to US$ 3.3 m in 2015 (IBRD, 2006).
The rural market is small with few opportunities. The urban market however is also small but is fast growing and opens to cheaper food imports. Bhutanese products include; milk, butter, buttermilk cheese (datse), condensed cheese (Churga), Gouda cheese, lassi and curd. Indian products include; fresh milk, butter, processed cheese, milk powder and oil. Bhutan’s market size therefore makes it prone to oversupply and price falls. This may disappoint existing suppliers especially those brought into market access by new farm

roads such as by the Decentralised Rural Development Project (DRDP) and the
Agricultural Marketing Enterprise Promotion Project (AMEPP).

Future Demand
The Bhutanese population is growing annually at 2.3%, while the urban population is growing at nearly 7% per year (IBRD, 2006). This would represent an average annual growth rate of 10% for dairy products when linked to the increase in purchasing power.
Table 3 shows recent and future urban demand for dairy products.
The urban demand in 2015 is expected to be 4,386 MT for fresh milk, 3,726 MT for tetra pack milk, 1,514 MT for butter and 4,630 MT for datse based on current trends(IBRD,
2006). This represents Nu 982 m per year or about US$ 25 m that could flow back to the rural areas. These data suggest that expenditure on livestock products is increasing and will increase more rapidly than on cereals since market potential depends not only on the quantity demanded but also on the elasticity of income and the elasticity of price.
The dairy-product export market in urban Assam is expected to grow from US$ 0.7 m in
2005 to US$ 3.3 m in 2015 and there may be export market potential in Delhi for Blue cheese. Bhutan may also be able to compete with ice-cream imported from Calcutta.

Table 3: Urban Consumption Growth of Dairy Products 2005 – 2015 (IBRD, 2006)
Milk product
Fresh milk
Tetra pack milk
Milk powder
Butter
Processed butter
Datse
Gouda type cheese
Processed cheese
Total
Total import
Total local products

Urban Consumption
(MT)
2005
2015
1,691
4,386
921
3,726
1,860
3,574
788
1,514
243
630
1,785
4,630
13
44
378
1,283

Annual
Growth
Rate (%)
10
15
6.75
6.75
10
10
13
13

2015 Value
(Nu m)
96
108
554
272
88
417
13
257
1,806
824
982

Based on the analysis of primary and secondary data combined with meetings with the
RGOB, donors, private sector and NGOs, the main conclusions are:
•
•
•
•

Set up MPU based on demand by farmers especially the core or interested ones.
Make milk payment to farmers independent of whether or not MPU sells.
Establish institutional and financial mechanisms to ensure that MPU income and expenditure is transparent.
Test milk quality and pay only if quality is high.

•
•
•
•
•
•
•
•
•

Capacity-build farmers and RGOB staff.
Do budget analysis to determine whether it’s possible for farmers to reduce milk production cost in order to be able to compete with imports.
Conduct market survey in order to identify the best places for dairy promotion.
Reduce marketing costs especially those of transport by (i) return loading and (ii) increasing marketed volumes.
Conduct market research on the urban demand for Bhutanese dairy products.
Collect and analyse baseline data on target villages/milk sheds with selected socioeconomic, demographic and institutional characteristics as well as needs.
Define the target group and target only those ready or willing to participate.
Focus simultaneously on income generation and empowerment. Start interventions on small-scale.
Set up and ensure efficient operation of monitoring and evaluation unit.

Milk Collection, Processing and Marketing
Milk processing

Farmer groups
Under the OGTP strategy of the MOAF, dairy is considered as an important activity.
Many of rural and peri-urban farmer’s rear cattle and dairy production forms a pivotal activity that can greatly enhance the income of these communities.
The DoL has been instrumental in the formation of dairy groups in many districts
(Table…), and continues to strengthen the existing groups while at the same time exploring the possibilities of initiating new groups. Currently the groups are differentiated by the type of activity they are engaged in, viz the sale and marketing of fresh milk (Fresh Milk Marketing), the collection of fresh milk and processing into local butter and cheese (Process and Marketing) and finally the collection and marketing of finished products from individual group members (Collect and Marketing).

Table ..: Farmer groups/organizations involved in dairying in district and geogs, and their characteristics District
Geog
1

Chumey

2

Tamshing

3

Tang

Chukha

4

Sampheling

Haa

5

Bji

6

Sengor

7

Chaskar

8

Tshogpa

9

Tshogpa

10

Shari

11

Shumar

12

Yurung

13

Zobel

14

Deothang

15

Orong

16

Gelephu

17

Sompangkha

18

Dovan

19

Umling

20
21

Chang/
Mewang
Shamkhar

22

Galing

23

Khaling

24

Samkhar

25

Yangtse

26

Jamkhar

27

Tongshang

28

Patshaling

Bumthang

Mongar

Paro

Pemagatshel

S/jongkhar

Sarpang

Thimphu

Trashigang

T/yangtse

Tsirang

Chumey Gonor
Lothuen Tshogpa,
Chokor Gonor
Lothuen Tshogpa,
Tang Community
Welfare Association,
Sampheling Meday
Gonor Gongphel
Tshogpa,
Yangthang Omgi
Tshogpa,
Sengor Norlha
Gongphel Tshogpa,
Chaskar Gongpgel
Ngyemrub Tshogpa,
Ngatshang Gonor
Chethuen Phunsum
Tshogpa
Themnangbe Om
Chethuen Tshongdrel
Tshogpa
Shari Om Lothuen
Tshogpa,
Batseri Gonor
Chithuen Tshogpa,
Yurung Gonor
Gongphel Tshogpa,
Zobel Gonor Thuenki
Tshogpa,
Deothang Milk
Marketing Group,
Om Datshi Thuendrel
Tshogpa,
Gelephu Milk
Tshogpa,
Lothuen Om Tshogpa,

30

Average
Monthly
Collection
2,400

39

11,629

253

1,875

26

7,353

34

1,960

21

2,256

35

n.a

31

n.a

24

6,300

Fresh Milk
Marketing

47

8,370

15

1,232

60

299

13

n.a

45

8,041

45

2,379

69

8,373

51

5,472

Maardatshe
Tshongdrel Tshogpa,
Umling Maardatshe
Tshongdrel Tshogpa,
Thimphu Peri Urban
Dairy Farmers Group,
Pam Meday Gonor
Gongphel Tshogpa,
Galing Pam Meday
Gonor Gongphel
Tshogpa,
Jerey—Lemey Gonor
Gongphel Tshogpa,
Kapti—Bikhar onor
Yargay Chethen
Tshogpa,
Yangtse Milk
Marketing Group,
See Chur Tshongdrel
Tshogpa,
Chirpen Tshongdrel
Tshogpa,
Beteni Gonor

23

n.a

61

n.a

71

11,669

50

5,005

8

343

Fresh Milk
Marketing
Fresh Milk
Marketing
Process and
Market
Collect and
Market
Fresh Milk
Marketing
Process and
Market
Fresh Milk
Marketing
Fresh Milk
Marketing
Collect and
Market
Collect and
Market
Fresh Milk
Marketing
Fresh Milk
Marketing
Fresh Milk
Marketing

22

411

30

3,600

20

2,100

46

n.a

33

n.a

41

n.a

Name of farmer group No.
Members

Type of
Group
Process and
Market
Process and
Market
Fresh Milk
Marketing
Fresh Milk
Marketing
Fresh Milk
Marketing
Process and
Market
Collect and
Market
Collect and
Market

Process and
Market
Process and
Market
Fresh Milk
Marketing
Collect and
Market
Collect and
Market
Collect and

29

Tangsibji
Sephu

32

Rukubji

33

Wangdue

30
31

Trongsa

Mendrelgang

Gogona

Gongphel Tshogpa,
Khuenphen Tshogpa,
Tangsibji Milk
Producers Association,
Sephu Dairy Farmers
Group,
Rukubji Dairy Farmers
Group,
Sha Gogona Milk
Processing Unit

10

n.a

21

2,265

79

617

65

1,411

30

3,900

Market
Collect and
Market
Process and market Process and
Market
Process and
Market
Process and
Market

Milk and Dairy Product Consumption patterns??

5. Policies and Institutional Support (Roger/Ibrahim)
Government Institutions Supporting the Dairy Sector
Pasture and fodder for dairying (Ibrahim)
Trade Policies
Promotion of private sector activities for Dairy Development
Dairy marketing institutions
Dairy feed manufacture

6. Recommendations
Recommendations for policies and institutions
1. Within the proposed DOL structure, it is recommended that Research and Extension sections be embedded as cross-cutting venture serving the three proposed Divisions
(Dairy Development, Livestock Production and Animal Health).
2. It is recommended that the DOL takes into consideration the importance of dairy development and ensures that under the new structure of dept, the Dairy
Development Division (DDD) is given a clear mandate.
3. It will be difficult for DDD to monitor the farmer groups which are scattered in the districts, hence it is recommended to decentralize the Dairy Development (DD) activities in the form of ‘Milk Sheds’ which will encompass the various districts based on the RGOB norms; WEST, CENTRAL, EAST CENTRAL and EAST. This would also encourage competition.

4. The milk sheds will provide a platform for the various stakeholders involved in DD to meet at least one in 6 months to implement and monitor the goals/activities of the
DDP and alleviate problems/constraints which hinder implementation
5. Strengthen the IMS by assigning a biometrician/statistician to support in data collection, compilation, screening and analysis by inter alia setting up a computerised market/marketing information system, collecting/analysing quantity and price data in major rural/urban market centres and mass media communication. All of the findings should be regularly disseminated to stakeholders.
6. Actively embark on venture to increase per capita milk/milk product consumption from present level of 38 kg/year to 78 kg/year which is the levels recommended by
FAO/WFP/WHO/UNICEF.
7. It is recommended that in the short term, importation of crossbred cows (costing about
24,000 Nu) to provide an impetus to milk production would be an option, however on the long term improving genetic quality of the national herd would be an economically appropriate and sustainable option. Also, importation of crossbred female calves or heifers would prove to be an economically option compared to importation of cows
(cost of a Jersey crossbred cow is about 24,000 Nu, compared to 5,000 Nu for a Jersey crossbred female calf).
8. NLBP should prioritise its activities in order to play an active and leading role to achieving high success rates with the AI program. Constraints such as inadequate government AI technicians could be overcome by carefully selecting devoted youth and training them within the umbrella of farmer groups as private AI technicians. The concept of private AI technicians has proved successful in other countries, and any incentives paid to them should be based on number of calves dropped by year rather than on number inseminations performed.
9. DOL should build up a group of Subject Matter Specialists (SMS) in various disciplines with the trained human resources they have within DOL, and prioritise the future training needs based on the foreseen gaps.
10. Explore alternative systems for monitoring and updating national and regional livestock statistics. 11. Promote the alternative provision of livestock services, including through private and cooperative institutions. Dairy co-operative development efforts should carefully consider all dairy farmer service needs, including animal health, AI, extension, credit, and inputs. Currently, not all services and inputs are adequately provided in all areas, and private dairy institutions and co-operatives could play an important role, as they do in other countries.
12. Maintain the status quo on tax and trade policies for imported dairy products. This position should be reviewed regularly, and revised if considered necessary to support domestic production under changing market conditions. Trade policies should be complemented by efforts to promote demand for fresh milk, which will favour domestic producers.

13. Rules, regulations and licensing governing production, processing and marketing of milk and milk products should be explicit, in particular in terms of volumes and types of products handled.
14. Strengthen institutional support for developing feed and fodder resources. With the continued upgrading of the national herd, the constraint posed by feed and fodder resources will grow more severe. Co-ordinating central and district level animal production and health departments to give priority attention to feeding and fodder extension may be one option.
15. Consider measures for those dairy processors using equipment obtained with government interventions, to compel them to collect more fresh milk and reduce dependence on imported dairy products.
16. DOL should promote closer linkages between qualified staff/researchers, with district level veterinary staff, farmer organizations, private companies and entrepreneurs to improve participatory research and extension efforts in support of dairy development.
Such participatory activities will better provide appropriate technologies and strategies, and their dissemination for dairy producers.
17. BAFRA should be focus more on quality assurance at MPU level to reassure the public that the units operate under safe and hygienic conditions. BAFFRA should be involved in assessing quality of products and issuing certificates of assurance of quality
18. Attempts should be made to register the existing farmer groups by the Department of cooperatives under the cooperatives act. However, the current notion of taxing the farmer groups after a 10 year period will hamper the enthusiasm to register.
19. Draft milk quality standards prepared under EU SLP by Dr. Boris which is accepted by
BAFRA, should be implemented at MPU level, if needed to be adjusted accordingly.
Recommendations for production systems
20.

21.

22.

DOL should not encourage the movement fresh milk long distances between points of production (the east) and points of high demand (the west). The distances are too great and the costs will be high. In areas where milk surplus may appear as milk production is encouraged, the milk should be converted to dates cheese and butter and transported in this form. Once a significant amount of fresh milk is available daily then it might be feasible to transport milk between adjoining milk sheds.
While bringing in new stock from India may increase milk production, the crossbreds already in Bhutan are not meeting anywhere near their potential, milk yields can be increased very significantly with proper feeding (quality forages, concentrate feed) and evening milking
Further research into and the promotion of improved fodder and feed technologies, given the observed low utilisation of fodder resources and low demand for compound feed. Similarly, research should address the role of common property feed resources, including those in the forest reserves, and identify ways of better management of those resources.

23.

24.

25.

26.

27.

More focus of government cattle breeding farm efforts should be on providing improved bulls, improved pregnant heifers to farmers, and production of quality semen for AI. Moreover, where AI services are not possible quality Jersey studs should be posted within the farmer groups.
Farmer-participatory research and extension for validation and promotion of appropriate technologies should be expanded. This would identify means of raising productivity that are suitable for existing production systems and traditional practices. Investigate quality of feed resources available in the various production zones/systems, and find ways of improving the availability and quality of compounded feeds, which are currently sparsely used in the dairy sector due to high cost and availability.
Increase in milk production potential of the improved breeds, will increase the incidence of mastitis and milk fewer. It is recommended that the farmers and grassroot level extension staff are trained of preventive measures to combat these diseases.
The recent trend seen in the decline in male cattle in the national herd should be encouraged and promoted through adopting strategies, such as culling of unproductive males. DOL initiative such as the establishment of the ‘Wangkar Calf
Rearing Centre’ (WCRC) is commendable. WCRC should be given a clear mandate to actively scavenge male calves from dairy farmers and move them to the centre.

28.

Similarly, collecting heifers from farmers within Bhutan and rearing them should be considered. 29.

The various trial schemes for cattle insurance be expanded and consolidated through registered farmer groups. This may require the adoption of a national cattle identification and registration scheme, similar to the one designed by NLBP.
Each MPU should have a business plan for their enterprise to ensure financial viability, and therefore long term sustainability.

30.

Recommendations for economics and markets
31.

32.

33.

Promote liquid milk consumption through generic campaign aimed at consumers, but also by encouraging market/marketing agents to better exploit currently untapped demand for liquid milk such as flavoured milk. Increased liquid milk consumption will have strong positive effects on opportunities for domestic milk production, given the clear comparative advantage domestic producers hold for supplying fresh milk demand.
Conduct feasibility studies to assess the production potential of the area before establishing MPUs. If there isn’t enough minimum volume of fresh milk input, this would significantly increase cost and may lead to negative profit and therefore will not be sustainability.
If market surveys show high and increasing long-term demand for milk powder, the
RGOB should form joint ventures with the private sector in setting up a local production plant subject to a financial feasibility analysis.

34.

35.

Research is needed into informal and traditional milk and dairy markets to identify (i) effective and appropriate market mechanisms, technologies, avenues for formalisation and quality control (ii) public health risks.
Because some areas are characterised by low milk production densities and long distance from milk processing facilities, research is needed into (i) alternative strategies for milk preservation (ii) and to identify target areas for their appropriate use. 7. The Dairy Development Plan
The goals of the dairy development plan are to:
•

•
•

•
•
•

Increase productivity of both indigenous cows and improved cows by 100%, from the present level of 400 litres/year from indigenous and 800 litres/year from improved cows if needed, increasing milk processing industries by similar orders of magnitude, supply of appropriate equipment to the milk processing plants, and if needed increasing the capacity of the existing once or setting up of new MPU in areas where the existing MPU cannot handle. Such investments should be done after conducting feasibility studies,
Improve quality of the milk produced to acceptable quality.
Increase per capita milk consumption from the current of 38 kg/capita/year to 73 kg/capita/year Increase farmer's income from dairy by 50%

The Dairy Development Division
DoL considers that the role and functions of the Dairy Development Division as follows: Responsible for developing policies and strategies for dairy development in the country. It shall cover all aspects (Marketing, Access, Production) of dairy (milk and milk products) from cattle, yak, buffalo
The division should have the most updated figures of dairy animal census, domestic production figures, import-export figures of dairy products, map out production potentials Resource mobilizing for dairy initiatives in the country
Establish linkage with National Diary Development Board and relevant Dairy boards in the region
Justification
Dairy development is a priority programme.
◦ Potential for expansion
◦ Listed as top priority activity in OGTP exercise
Demand for improved dairy husbandry, management and technology is increasing.
Coordination of various Milk Processing Units being established in the country.
Milk sheds
The high number of smallholders and landless people engaged in dairy together with the significantly increasing demand for milk and other dairy products and the existing supply gaps has put dairy high on the development agenda in Bhutan. This ambitious 15-year
National Dairy Development plan prepared by SLSP/RGOB, introduces the concept of

milk sheds to avoid transportation of unprocessed milk over long distances which is uneconomical. Using the norms used by MOAF, the districts are grouped into 4, namely;
West, West Central, East Central and East. (see map below for their characteristics).

WEST

WEST CENTRAL

East
Total cattle:
− Indigenous
− Improved
Indigenous males
Indigenous females
Indigenous cows in milk
Improved males
Improved females
Improved cows in milk
Total milk production (MT)
Number of farmer organizations EAST CENTRAL

East Central

Milk Shed
West Central

EAST

West

Zonal distribution of households
The total human population in Bhutan as assessed in the RNR Census 2008 was 631,105, of which 43% live in the West zone followed by 29% in the East. (Table ). Similarly, out of the total 38,311 urban households in Bhutan, 67% are in the West zone indicating its importance for demand for milk and milk products.
Table . Rural and urban households in Bhutan and human populations (district-wise
Rural
Households

Urban
Households

Total
Households

Total
Population

123

7,690

6,792

14,482

72,410

91

1,866

424

2,290

11,450

Paro

389

6,552

566

7,118

35,590

Samtse

308

9,176

2,216

11,392

56,960

Thimphu

Milk Shed

No of Villages

112

2,784

15,728

18,512

92,560

1,023

28,068

25,726

53,794

268,970

109

3,899

4,206

21,030

District

WEST ZONE

Chukha
Ha

WEST CENTRAL
ZONE

Total
Dagana

72

Tsirang

85

3,278

373

3,651

18,255

Punaka

261

4,237

327

4,564

22,820

Wangdue

314

4,773

1,454

6,227

31,135

Total

841

16,830

2,545

19,375

96,875

Bumthang

105

2,130

740

2,870

14,350

Sarpang

173

4,964

7,490

37,450

Trongsa

89

2,211

528

2,739

13,695

Zhemgang

65

2,828

551

3,379

16,895

432

12,133

4,345

16,478

82,390

Lhuentse

291

2,765

236

3,001

15,005

Mongar
Pema
Gatshel
Samdrup
Jongkhar

718

6,553

7,787

38,935

93

4,249

4,611

23,055

189

4,934

2,196

7,130

35,650

Trashigang
Trashi
Yangtse

286

9,155

1,126

10,281

51,405

133

3,223

541

3,764

18,820

Total

1,710

30,879

5,695

36,574

182,870

TOTAL

EAST
CENTRAL
ZONE

Gasa

Total

EAST ZONE

643

307
84

4,006

87,910

38,311

2,526

1,234
362

727

126,221

3,635

631,105

Source: RNR 2008

Zonal distribution of cattle and milk production
The distribution of indigenous and improved cattle, and their milk productions in the 4 milk sheds and associated districts are given in Table . Of the 24,940 MT of milk

produced in 2008, 35% was from the East zone followed by 275 from the West zone.
The East had higher numbers of both indigenous and improved breeds.

Table . Cattle population and milk production (District-wise)
Cattle Population
District

Improved

Total population 2,433

2,451

1,302

840

71,456

13,850

6,820

Dagana

16,623

3,112

1,145

714

271

318

Tsirang

8,886

4,771

Punaka

9,871

2,199

773

20,648

2,822

1,643

56,742

13,175

4,908

5,845

4,110

1,135

Sarpang

21,152

4,077

1,743

Trongsa

8,149

1,859

Zhemgang

9,112

1,442

496

44,258

11,488

4,394

Lhuentse

10,831

1,430

788

Mongar
Pema
Gatshel
Samdrup
Jongkhar

21,344

4,304

2,041

5,925

3,131

764

14,102

2,995

Trashigang
Trashi
Yangtse

19,373

3,384

2,779

8,694

1,742

853

Total

80,269

16,986

8,818

Bumthang

Source: RNR 2008

69,917
55,746

Gasa

97,255

Thimphu

1,823

1,030

1,019

1,593

27

34,253

Samtse

1,444

20

4,496

18

9,390

35

Paro

6,820

1,183

4,908

2,162

4,394

5,566

85,306

Ha

Total

WEST ZONE

1,531

Total

CENTRAL
ZONE

3,457

Wangdue
EAST
CENTRAL
ZONE

19,796

Total

EAST ZONE

Chukha

Indigenous

8,818

Milk Shed

Milk Production
Milk
%
Milk
Production contribution
Production
per Zone to National
(MT)
Grid

Criteria and rationale for the Dairy Plan
The criteria to be addressed and the rationale for the dairy development plan are given in the matrix below.
Criteria
Growth and market opportunity (is there evidence of increasing demand for milk and milk products, locally or regionally, and why, among whom?)

Rationale
In the past decades per capita milk consumption in Bhutan has stagnated around 38 gram per day, as compared to India which increased from 150 in 2000 to 250 gram per day in 2009, with a predicted consumption of 370 gram daily in 2020. A demandsupply gap has existed for at least the past three years resulting in price increases on a year to year basis. This is severely affecting the ability of rural and urban poor to buy milk. Pro-poor potential
(how will the poor be involved? Is there evidence they can play a significant role in increased production, or being employed in value chain activities, or will be benefit from increased consumption?)

The number of persons below the income poverty line in Bhutan in 2003 was about
32% of which most were in the rural areas. An estimated 30% of households were also food insecure especially in the rural areas and among farmers without sufficient livestock. Such poverty and food insecurity may become worse if the increase in the number of poor or the degree of poverty is not offset by the economy’s sustained increase in widely-distributed income. The reduction of this poverty and food insecurity is a key RGOB objective, and this is because much of Bhutan’s poverty and food insecurity is caused by low livestock productivity and poor livestock marketing. Researchable supply constraints
(Are there supply constraints, such as large productivity gaps or transactions costs that evidence suggests research may be able to provide solutions for, and would create production and welfare gains?)

Of the total cattle population, only about 12% are cross bred with average milk yields
(corrected to 365 day lactations) of 6 kg per day. Majority are local cattle with average milk yields of only 1.5 kg. In the years 2002-2008 growth in the dairy sector was due more to an increase in herd-size, rather than milk production per animal. Actual yield increases were negligible.

The increased regular income in relatively small amounts offers households the opportunity of improving their access to nutritious food. Female household members are generally responsible for feeding and management of livestock within the homestead. Increased milk production along with hygienic milking and product processing, and improved training on basic nutrition, especially child nutrition of women and children, and food safety could have a significant impact on food and nutrition security.

Feed is the major financial input into dairy accounting for an estimated 70% of the production cost and is a major constraint to increasing production. Reduced access to grazing and rising opportunity costs for producing fodder crops has led to considerable increases in feed prices. Concentrate availability is limited because of the priority of allocating land to food crops. Progress in improving feed supply through green fodder and forage production has been slow, and any expansion has been constrained because of the availability of arable land and irrigation water. On the other hand, various feed resources remain underutilised and few opportunities for improving feed rations through supplementation or processing are implemented.
Knowledge and extension on feeding remains inadequate.
Poor genetics of breeding animals is another constraint to improving dairy productivity. (as stated above, only 12% of dairy cattle are cross bred). Even where
AI is being used, very few of the breeding bulls have been tested. Furthermore,

conception rates after AI are low. Private AI services are in their infancy and often impaired by government policies. The introduction of exotic semen for crossbreeding is hardly regulated, leading to low fertility and survival rates of higher grade dairy animals.
Animal health services are very variable with a large number of producers having low access to veterinary services, due to accessibility. Even where veterinary services are present they often have inadequate facilities and a lack of operational funds. Similarly livestock extension services are limited. Animal diseases such as Foot and Mouth
Disease, Brucellosis and Haemorrhagic Septicaemia cause large economic losses.
In general the key services necessary to improve dairy animal productivity and management are found to be fragmented, uncoordinated and non-integrated.
Services are rarely tailored to the need of smallholders. Their high transaction cost is a further element discouraging participation of poor producers in dairy value chains.
Economically and institutionally viable models for integrated service delivery in the dairy sector are virtually absent or operating at an insufficient scale.
With the exception of the large urban centres, most of the milk marketed is traded through the informal sector. Most milk produced is processed. Cooling facilities are limited and restricted to the organised sector, leading to considerable food safety issues. Enabling environment (is there a supportive policy environment for uptake affecting the poor, adequate infrastructure, adequate NRM and ecosystem service?
Anticipated relevant development investments?)

Existing momentum (does RGOB have good experience and credibility locally, partnerships with
NGO, and private sector that can aid implementation, uptake and impact?)

The high number of smallholders and landless people engaged in dairy together with the significantly increasing demand for milk and other dairy products and the existing supply gaps has put dairy high on the development agenda in Bhutan. An ambitious
15-year National Dairy Development plan has been prepared by SLSP/RGOB, which introduces the concept of milk sheds to avoid transportation of unprocessed milk over long distances which is uneconomical. RGOB recognises the potential role of the private sector (dairy processing, strengthening farmer organizations, feed, AI etc) and a viable marketing structure in addition to dairy cooperatives. In addition, both private sector and co-operative dairies are showing renewed interest in investing in improved collection, processing and distribution systems after many years of stagnation. The choice of the dairy value chain in Bhutan is based on the importance of milk in food security, and the importance to poor consumers and poor rural producers.
SLSP and FAO has already carried out studies on aspects of the dairy value chain, which had led to changes in policy on the production and informal market sector and is in the process developing several large dairy projects that address technical constraints to dairy development in the feed, health and breeding sectors. These projects are to be implemented in close collaboration with RGOB and several private enterprises (milk procurement, dairy processors, feed manufacturers) and farmer organizations. Box 1: Yoghurt Production Enterprise in Thimphu (Antony, 2010)
DOL yoghurt production started in Thimphu in 2009 and this production reached 19,486 kg. It required 19,915 litres of fresh milk input although the factor for converting fresh milk into yoghurt is usually 1 litre: 0.8 kg. The difference in this case was made up by the addition of skimmed milk powder. The daily plant capacity is 250-300 litres of fresh milk, but the quantity processed is below this mainly because of the lack of a High Temperature Short Time (HTST) heat exchanger and the resulting time taken to heat and cool the milk. The current quantity processed averages 51 litres per working day in winter (December to January) and 73 litres per working day in summer (March to
November). The plant operates 4 days per week in winter and 6 days per week in summer.
Current (June 2010) maximum daily production is 130 l and this is sufficient to meet total current
Thimphu demand.
The plant has been operational for 21 months but there are occasional breakdowns associated with the cup sealing machine. Also, occasionally water shortages were experienced when water had to be sourced from elsewhere.
Cost
The cost of buying milk (with a fat content of 3.8% - 3.9%) is Nu 35/litre and the average daily wastage of milk and yoghurt is about 3-4 litres and 1-2 cups respectively. Investment and recurrent costs are estimated at Nu 3.7 m and over Nu 3 m, respectively.
Income
Yoghurt is sold in cup sizes of 400 ml, 150 ml and 100 ml at a wholesale price of Nu 35, Nu 15 and
Nu 10 respectively. This gives an annual gross income of Nu 5.2 m, however the monthly income varies due to low demand in winter and high demand in summer. Shopkeepers come to collect yoghurt from the plant.
Net Income
Yoghurt production is financially profitable with annual net income ranging from Nu 0.56 m to Nu
2.25 m.
Future Plan
The plant could increase capacity if (i) a HTST heat exchanger was provided (ii) more sealing machines were purchased (iii) more staff was recruited (iv) a freezer vehicle purchased and (v) yoghurt demand is expanded through; advertising, television, signboards, poster and school campaigns. Box 2: A Dairy Entrepreneur – Mr. Kinlay Penjor (Source: Antony, 2010)
Mr. Kinlay Penjor started his business life in a small village shop near Ha and after several years managed to save sufficient finance to establish a Thimphu-based dairy enterprise. He started his enterprise in December 2008 with daily purchases and sale of 20 litres. But, today, the daily fresh milk volume traded ranges from 400 to 500 litres.
As of today his enterprise includes; 6 display cabinets (totalling Nu 150,000), 1 deep freezer (Nu
35,000), 7 voltage stabilisers (totalling Nu 11,900), and one milk bulk cooler was provided in-kind by the Department of Livestock in June 2010. He employs 3 staff for packing/bottling at an annual total cost of Nu 108,000 which would increase to Nu 117,000 after 6 months service and to Nu
126,000 after 1 year’s service.
Daily fresh milk purchases are currently 400-500 litres although no records are kept. The milk is sourced from Jabana Farmers’ Group (≤ 200 l) near Ha, and ≥ 200 l from SLOT (Shari Cooperative
Members’ Milk Society) in Paro and 200-240 l from Thimphu’s Peri-Urban Milk Booth.
The milk is crudely graded into high quality (when the lactometer reads more than 1.03) and low quality (when the lactometer reads less than 1.025). There is also a smell and taste test performed.
The price paid by Kinlay for 1 litre of fresh milk is Nu 30 and Nu 35 for low quality and high quality respectively.
Total investment and recurrent costs are estimated at almost Nu 0.2 m and Nu 0.56 m respectively.
Gross Income
All of the milk is sold on most days and the sale price is Nu 35 and Nu 45 respectively for low quality and high quality. Some days the unsold milk is naturally converted into drinking curd, which is sold. The main milk buyers include small hotels, bakeries and Indian traders (mainly for conversion into Indian “sweets”).
Gross annual income averages about Nu 0.59 m.
Net Income
Monthly net income ranges from Nu 25,000 to Nu 30,000.
Future Plan
Kinlay’s ambition is to expand his business by (i) buying bulk milk cooler and a walk-in cooler, and
(ii) to start the production of yoghurt and ice-cream. These new ventures would cost about Nu 2.8 3.0 m, but he needs to raise this money from a bank. The second major problem is milk quality variation. Department of Livestock

IMS, Publication & communications

Dairy Development

Livestock Production

Division

Division

Animal Health
Division

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National Dairy
Programs
Development
Program (NDDP)

NFFDP
NLBP

National Poultry
Development
Program (NPDP)

National Centre for
Animal Health

National Swine
Development
Program (NSDP)
National
Fisheries
Development
Program (NFDP)

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Cattle Farms

Pigs and Poultry farms and Fisheries
Stations

REGIONAL LIVESTOCK DEVELOPMENT CENTRES (RLDC)

DZONKHAGS (DLO, ADLO)
GEOGS (Livestock Extension Officer)

FARMING & URBAN COMMUNITTIES

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