Dairy Sector of Pakistan

Introduction:
Being major player in national economy livestock sector has been selected as an economy engine for poverty alleviation from Pakistan. According to economic survey of Pakistan 2011-12, its contribution to agriculture value added is approximately 55.1 % and to national GDP is 11.6 %. Livestock is raised by more than 8.5 million small and landless families in the rural areas and 35-40 million rural populations are dependent on this.
In Pakistan livestock includes cattle, buffalo, sheep, goat, camels, horses, asses and mules. Milk, meat, wool, hair, bones, fat, blood eggs, hides and skins are the main livestock products among which milk and meat are taken as major products. Besides this, these animals are used for draught purposes.
Pakistan is fourth largest milk producing country in the world. Milk is produced by buffalo, cattle, sheep, goat and camel but being major contributor in milk production, cattle and buffalo are considered as major dairy animals and are always mainly focused and discussed. These dairy animals are also used as draught and beef animals. When a dairy animal has spent her productive life and becomes uneconomical for milk production then she is used as a beef animal. Male calves of dairy animals and dairy bulls when no further required for breeding purposes are also utilized for beef purposes.
Buffalos found in Pakistan make up 47% of Pakistan 's major dairy animal 's population providing more than about61% of the total milk produced in the country. Cattle constitute about 53% of the national population of major dairy animals in Pakistan and contribute the share of almost 34.9% to the total milk production in country.
Pakistan’s Dairy Sector produced 46.44 million tons of milk in 2010-11, making Pakistan 4th largest producer of milk in the world.
More than 96% of the milk produced in Pakistan comes from cattle and buffalo. The rest of it is collectively produced by sheep, goat and camel which, most of the time, is not sold as such, rather mixed with buffalo and cow milk. Estimated national livestock Population and milk production of 2011-12 based on National Livestock Census 2006 is given below:

Species | Population (Million) | Milk Production (Million Tons) | Cattle | 36.9 | 16.741 | Buffalo | 32.7 | 29.565 | Sheep | 28.4 | 0.037 | Goat | 63.1 | 0.779 | Camel | 1.0 | 0.829 | Total | 162.1 | 47.951 |
Current Estimated Province Wise Livestock Population is given below: (Millions) Province | Cattle | Buffalo | Sheep | Goat | Camel | Punjab | 18.1 | 21.2 | 6.8 | 23.3 | 0.22 | KPK | 7.4 | 2.3 | 3.7 | 11.3 | 0.07 | Sindh | 8.5 | 8.8 | 4.3 | 14.5 | 0.30 | Balochistan | 2.9 | 0.3 | 13.6 | 13.9 | 0.41 | | | | | | |
Milk is favourite food in Pakistan and is consumed as fresh, boiled, powdered and in processed form as yogurt, ghee, lassi, butter, cheese, ice cream, sweets and in other confectioneries. The interesting thing regarding the dairy sector of Pakistan is that although we are fourth largest milk producing country in the world but still this production falls short to meet national demand. As a result milk is to be imported to fulfill this demand. Human milk consumption in Pakistan for year 2011-12 is given below: Species | Human Milk Consumption (Million Tons) | Cattle | 13.393 | Buffalo | 23.652 | Sheep | 0.037 | Goat | 0.779 | Camel | 0.829 | Total | 38.69 |

Let 's have a look on different production systems of Pakistan. Till late eighties, more than 60% of buffaloes and some cows were maintained under the system of Rural Subsistence Production System. In this system on an average there were 3 to 4 dairy animals with one or two adult females. Almost 50 to 60% of the feed requirements of these animals were fulfilled from grazing along with wheat straw and some green fodder. ¼th of milk produced was sold out and remaining was utilized for domestic use. This system still exists in some areas of Pakistan.
With the time being Rural Subsistence Production System changed into Rural Market-Oriented Smallholder Production System. Under this system, on an average there were 5 to 7 animals per herd, inclusive of cow; 3 to 4 adult lactating animals, one or two heifers, and one or two male calves, but most often no bull. Feeding requirement of lactating animals were fulfilled from fodder along with wheat straw and seed cake. More than 70% of milk produced was sold either directly or through middlemen. This system was practiced by those smallholders who have access to nearby livestock markets.
In 1980s, dairy sector in Pakistan moved towards commercial side and development of rural commercial dairy farms started. A typical rural dairy farm running on commercial basis consisted of about 30 animals of which 70% were females, including some cows. Approximately 40% of these adult females were in milk during most of the year. Fodder crops provided 50% and straws about 35% of the feed requirements and concentrates made the rest of it.More than 90% of the milk produced at the farm was sold.
With growing demand for milk in urban areas rural commercial dairy farming moved toward peri-urban areas. In peri-urban areas there are large and small dairy herds consisting of 20-50 animals with nearly 90% of adult females in production. Male calves are disposed off within first two weeks of birth. These animals are fed chopped green fodder and wheat straw and concentrate mixture with target to sell almost total milk produced.
Due to enhanced rate of urbanization over the last 2 to 3 decades, large peri-urban commercial dairy farming is going towards urban commercial farming. Targets of these farms are to get maximum milk production with economical and quality feeding and good management. Animals on these farms are fed good quality green fodder or silage along with concentrate mixture. Dairy animals maintained at these farms are considered elite animals, hence their yields per lactation are considerably higher than those of animals maintained under other production systems. Milk produced on these farms is either sold out in processed/fresh form through outlets or departmental stores or supplied to dairy companies.
During last ten years major changes has been occurred in dairy sector of Pakistan and due to these change this sector is on the way to become an industry. A large number of modern dairy farms have been established in different areas. Most of these dairy farms have exotic animals and number of these animals is in hundreds and even in thousands. Dairy farms with more than 3000 animals also exist and with 5000 animals are in plan. Such farms have adopted most modern managemental and feeding practices and well trained man power. Milk produced on these farms is either sold out in processed/fresh form through outlets or departmental stores etc. or supplied to dairy companies.

Dairy Industry constraints include: low productivity, seasonality in milk supply, fragmented distribution system, lack of mechanization, automation and refrigeration, and unhygienic handling, leading to poor quality milk, well-below international standards.
The last decade saw the introduction of imported cows and buffaloes for mass milk production from Australia, Europe and the United States. The role of the various government departments involved in promoting the import of milking animals from countries, having a totally different weather profile than ours, has been highly controversial with high casualties. There is a clear-cut lack of policy and assistance for the indigenous small to medium livestock farmer.

The SMEDA has assumed the role of an importing agent of foreign cows and buffaloes; hence, it is accused of neglecting the development of the indigenous livestock industry. Clients approaching SMEDA for assistance on starting a dairy farm are aid to be only encouraged to set up an imported animal farm and no help is available to assist in the farming of indigenous breeds.
The indigenous livestock sector is characterised by very low milk yield per animal. The dairy sector mostly operates on non-commercial basis in the unorganised sector, while the organised sector processes only a small fraction of the country’s total milk production. To meet the domestic demand, Pakistan imports powdered milk. Average annual deficit of fresh milk is projected at 1170.41 million litres.

The major milk producing countries in the European Union (EU) and North America provide regular farm subsidies to the dairy sector, while none are offered to the dairy sector in Pakistan. The fact is that Pakistan enjoys comparative advantage in milk production, despite its very low milk yields per animal.

Several years ago, our world renowned Sahiwal breeds famous for high milk production were imported by Australians to improve their milk yield per animal through crossbreeding. Due to the long productive cycle of these animals, it takes several years to develop breeds of animals with high milk yields. The countries with a long-term vision and policy, thus, opted for this route, while our reactive approach oriented governments preferred the shortcut by encouraging the import of Australian and Swedish milking animals.

The Australian milking animals yield over 20 to 30 litres per day, while the Swedish animals yield between 30 to 40 litres per day. Special controlled sheds are needed to keep the temperature 5° to 10° below the atmospheric temperatures of the day. The feed for these animals is also procured from specific companies. In addition, specially trained dairy technicians and managers are needed to run these farms. Also, the cost of these imported cows and buffaloes is 2 to 3 times more than the average price of our domestic animal. Then the setting up and maintaining of controlled shed dairy farms is an expensive affair and not advisable for the small to medium livestock farmer.

To make our livestock and dairy sector efficient in the long term, we need a balanced policy to ensure that the small farmer is not adversely affected by modernising the industry through practices favouring the rich and the wealthy. Farmers need to be educated and facilitated through sustained efforts to improve their animal stocks, management systems, and production technologies.

Evaluation of the sector development strategy proposed in the document..
The USAID has proposed Pakistan Dairy Strategic Working Group Strategic Plan In year 2006 and proposed The Dairy Industry’s vision is to position itself as one of the 5 most competitive dairy industries in world over the next 10-15 years. Economic success across the Dairy value chain will contribute to rural development and poverty alleviation, and have significant positive spillovers to the overall health of the population. The vision is focused on three long-term development objectives to be achieved through five tracks of strategic initiatives.

Raise Value Chain Productivity:
To raise the farm productivity the document suggest following initiatives which were discussed one by one:
Establish model commercial farms

Small dairy holders in Pakistan are unorganized and mostly carry out production and marketing in isolation from each other. This particularly hampers farm profitability in a scenario where production base is highly fragmented. On the other hand, collective marketing can enable individual farmers to reach farther markets and result in increased revenue. Farm management practices, infrastructure, mechanization and automation are all well behind other milk producing nations, particularly the large exporting nations. Subsequently, milk yield is low by international standards at 1333 liters/lactation, about one third that of New Zealand’s.
A number of key factors currently limit farm milk production for both water buffalo and cows * Poor access to quality drinking water for animals; * Low quality feed limiting energy and protein supply; * Heat stress on animals much of the year leading to animals using much energy through out the year for cooling rather than producing milk; * Basic levels of farm management and lack of adoption of modern farming practices and technology; * Lack of mechanized milking facilities and virtually no refrigerated safe storage; * Fragmented farm network: over 70% of farms with 1-3animals on less than 2 hctrs of land * Poor breeding practices

To improve the economics of dairy farming, farmers must: * Have the knowledge and incentives to increase animal yield and animal holding per farm.
This requires a simultaneous focus on encouraging larger farms where large scale commercial production is sustainable and on giving an incentive to the smaller, subsistence farmer to invest in productivity.

* This initiative will establish model commercial dairy farms across full range of farm sizes to increase overall farm productivity by practically demonstrating new technologies and best practices and training other farmers on-site through adoption of better farm management paracices. This knowledge will then be extended to the immediate district. The farms would provide a focal point for the industry. At the same time the model farms could facilitate training of local farm advisors for extension of the program in years 2 & 3.

Model farms will be established with adequate financial and technical support to: * Implement objective measurement and recording systems, (cow identification, milk yield records, feed analysis); * Benchmark current farm performance; * Identify specific factors limiting farm productivity and profitability; * Develop and implement farm management changes to overcome limitations; * Develop milk harvesting and storage facilities to achieve minimum milk standards; * Extend new farm management practices to adjoining farmers. * The geographic spread and different farm configurations within Pakistan call for setting up model farms in each of the main regions. * Satellite farms, those adjoining and influenced by the model farms, would number around 6-8 in the Punjab/Sindh region and 4-5 near Karachi, per model farm. This provides a multiplier effect to accelerate dissemination of information and adoption of better farming practices. * Potential also exists for the development of larger-scale farms within both the main regions. These farms would be 500-1,000 cow scale or larger owned by business people with an interest in the dairy sector. Their association with the initiative would be mutually beneficial and should be facilitated. Innovation through capital investment in technology etc may make these farms excellent demonstration and training centres and attract FDI.

Management Guidelines for Model Farms
Expected Results of Model Farms
The model farms initiative is expected to have a direct impact on farm productivity and profitability, raise income of farmers, and increase the quality and quantity of milk supply. Indirectly, this initiative will have a transformational effect on the dairy farming sector overall.
At the end of year 1 the model farms should: * Identify the most limiting factors for milk production; * Test key farm management changes to lift milk production; * Quantify milk production responses from farm management changes; * Develop best farm practises for various regions; * Identify future research needs; * Trial extension methods and adapt for best results; * Be a focal point for the dairy industry.

The outcome of better farm management is illustrated short term and long term basis. At larger farms the effect is more pronounced as they can experience yield growth rates upto 15% per year for the first few years.

Investigate new technologies, systems, and seasonal economics

Productivity
Due to lack of proper management practices and poor breeding, animal production tends to be very low. This results in low farm profitability and reduced national productivity. For instance, when compared with Germany, Pakistan houses thrice as many dairy animals, but milk yield is one fifth of Germany.

Seasonality
Production and consumption of milk in Pakistan are faced with seasonal fluctuations that are at relative odds with each other. Milk production is associated with the availability of green fodder and is at its maximum between January and April and hits a low from May to August. Alternatively, milk consumption is low during the winters and is at its peak during the summer due to higher intake of consumer intake of milk products such as lassi, yogurt, and ice cream. Figure 4 demonstrates the seasonal fluctuation in supply and demand.

For small holders, milk sales are a way of regular cash flows and the livestock owned by them constitutes an invaluable asset . But, in the absence of financial services such as insurance and credit, they do not have a financial recourse in times of emergency such as livestock disease or mortality. Similarly, smallholders do not have ready access to credit that can enable them to improve their enterprise, e.g. addition of improved marketing infrastructure.

Improve the quality of feed: Provision of adequate livestock nutrition is a major constraint to the development of Pakistan’s dairy industry. Feeding practices are governed by the farmer’s land holdings, socio-economic status and marketing of livestock and their products. Feed resources used in Pakistan can be divided into the following categories: (i) green roughage, (ii) dry roughage and (iii) concentrates. Challenges: * The present feed resources in Pakistan do not meet the nutritional requirements of the livestock. * Decreasing area under fodder crops, shortage of irrigation water, less and erratic rainfalls, barren rangelands, low priorities on fodder production and preservation, shortage of feeds and fodders will be a great challenge to the future livestock industry. * Inadequate diets result in economic loss in terms of animal health, feed conversion efficiency and, ultimately, the output of animal products. It is reflected in milk production (in terms of both quantity and quality) and has a direct effect on the economics of production. Initiatives: * Evaluation of concentered feeds requirement and promote investor in his sector specially o full fill the fodder requirement of pre-Urban farms . * In rural areas the improved nutrition may be obtained mostly from using improved crops and silage. Upgrade supply chains through investment in farm cooling tanks: Challenges: * Dairy processing units collect milk from small holders situated in far flung rural areas and problematic due to socio-economic constraints such as security and road conditions. * Moreover, factors such as lack of cold chains, fragmented farm base, and distance to dairy farmers affect processing operations. Consequently none of the processing units is operating at optimal capacity. Initiatives o be taken: Two of the favored options being mulled are: * vertical integration of activities by piloting corporate farming, an idea new to the national dairy practices; and ii) * providing additional support services to medium and large farmers in return for selling bulk quantities of fresh milk to the processors. Large corporations have had no choice but to rely on small farmers. Expand Supply Pockets: Challenges: * The current supply pockets are concentrated in a few areas in Punjab in and around the Sahiwal and Okara region. Initiatives proposed * Develop supply pockets in other regions within Punjab and as well as in other provinces. * The new pockets will be established on actual supply / demand mapping. * New supply pockets will require investment in specialized transport infrastructure. Increased efforts to catalyze development of new supply pockets will create opportunities for processing to move closer to supply zones as well as stimulate investments in support infrastructure such as transport. * Developing new supply pockets will also increase income earning opportunities for the rural poor. Health and safety campaign on poor quality milk: Challenges: * Low consumers awareness about drinking milk. * Farmers and distributors are still reluctant to adopt new standards for fear of higher costs and disruption in income streams. * From the retailer’s perspective, introduction of milk quality standards and regulations may lead to higher average wholesale prices and short-term disruptions in supply.

Initiatives: * Present barriers to adoption of international standards and must be countered by a widespread, effective public health campaign about the current health risks and benefits to consumers of adopting new standards for milk production and distribution. Compile reliable fact base on existing/potential supply pockets: Challenges: * Industry information on dairy supply in Pakistan is unreliable and outdated. * No proper studies to track and monitor the health and potential of dairy industry on macro and micro levels. Initiatives: * A comprehensive survey should be planned in coordination with NGOs and government sector to chart out the farms and their supply and demand sector so that hat new investment on infrastructure and distribution channels will be calculated to propose and optimize the current practices both at investment sector as well as distribution channels. * In optimistic scenarios, supply capacity may initially outgrow local demand, and the Dairy industry may have an opportunity to look beyond urban consumption into export potential. All of the above call for a coordinated study on potential distribution channels for perishable milk.

Strengthen Policies for Increased Quality and Competitiveness
Improve and enforce existing food safety standards will require: * Preparation of draft food safety standards (qualitycodes); * Adoption of a legal definition of milk; * Adoption of laws requiring: * All milk to be collected and transported in enclosed hygienic vessels; * All milk to be chilled to less than 7 degrees within 4 hours of milking; * All milk sold for consumption to be pasteurized; * All manufactured dairy products to be produced from pasteurised milk; * All dairy manufacturing factories to be registered and subjected to a quality audit program (HACCP 16 ); * All packaged food to be labelled according to laws in line with international standards. * An agreed timetable needs to be established for the industry to meet the above legal requirements

Policies to support domestic and export market development: * Increase productivity to the levels of international competitors. * Exempt tax to all level of investment and production related to Dairy Industry to promote the business and create a competitive price in region and international markets.
Invest in Workforce Development:
The below figure will best illustrate the proposed initiative in this document:

Strengthen Industry Organization and Supporting Institutions:
Establish Dairy Pakistan: In an effort to better coordinate the strategic initiatives ofthe dairy industry, industry leaders have established Dairy Pakistan to bring together representatives from across the spectrum of the value chain from farmers to retailers. The organization’s mandate is to: * Develop and implement sector strategy to improve sector competitiveness; * Collaborate with research and training linkages promote industry capacity to develop and use improvements and innovations. * Encourage farmers, industry, quality suppliers and service providers to invest in dairy; * Provide policy and regulatory support; * Local and international market development; * Information management to the Dairy chain; * Improve delivery of benefits to the Dairy sector. * This new body will ensure that all key stakeholders, public and private, are inputting into the strategy development and implementation. * Key governing board members includes; Farmers, Processors, Other suppliers, traders, wholesalers, retailers, and industry services; Consumers; Academia and Research institutions/laboratories; government – MINFAL, Ministry of Industries/SMEDA; Financial Institutions.
Promote establishment of farmers’ organizations
The objectives of the farmer should be: * To organize farmers to develop and implement long-term Dairy Farming strategy for Pakistan including national and regional breeding and feed rationalization plans; * To make policy and investment suggestions to the government; * Co-ordinate with Dairy Pakistan to encourage research and development to improve animal milk potential and farm economics; * To negotiate better pricing and quality controls to encourage better quality milk and higher productivity; * To encourage new investment in Dairy Farming by existing farmers and by attracting new entrepreneurs; * To improve the quality of milk through promotion of better hygiene, veterinary and farm management practices; * To collaborate with Research and Training providers to organize farm level training and research to improve farm economics and productivity; * To promote international standards and best practices in Dairy Farming; * To collaborate with different local and international dairy associations and agencies to upgrade dairy farming in Pakistan and represent the interest of the farmers in local and international forums; * To develop and facilitate replication of successful dairy farming models including corporate farms, cooperatives and other models.
Furthermore there is need to establish network of accredited laboratories to control the milk quality throughout the nation and sectors for compliance of standard and will also open the door of new investment and job creations. The establishments of Support establishment of Dairy Research Institute are very vital to create the applied research for the benefit of industry by better product development and work force training. The special emphasis is required to Encourage Development of the local Engineering Industry With the development of the Dairy Sector to obtain larger quantities of quality milk for processing there will be a need for a significant quantity of manufactured equipment such as farm cooling tanks, road tankers, silos, milk cans, milking machines, fodder harvesters etc. Currently, much of the equipment is imported. There is an opportunity for local engineering companies to manufacture much of the required equipment and in many cases to develop equipment which is specifically suited to local conditions. The SWOG and Dairy Pakistan will encourage new investors by linking international manufacturers with potential local investors, assisting in developing feasibility reports and business plans and identifying sources of financing.

Expected Impact of The SWOG recommended Initiatives :
Current prospects of the dairy sector industry indicate the potential of a significant increase in the value of the sector with much of that value generating significant additional returns for the farmers. By 2015, conservative projections estimate an additional Rs. 11 million, or $184,000 per day in cash flow to farmers.

Increased productivity through better farming practices and introduction of farm cooling tanks have the potential to result in a four-fold increase to annual farmer income.

Recommendations
The importance and significance of sector is well explained by the document and hence proposed a long term strategic initiative plan to promote this industry and make it more profitable and able to generate the income for country from the international markets also. Going further; due the importance of clusters in economic development and its positive impact on entire value chain authors propose some recommendations at policy level to enhance the sector productivity .Secondly large investment is also desirable from big corporations and international firms to invest in large scale farming.
It is understood that the industry or firms only be competitive based upon their level of innovation and tendency to upgrade as per customer requirement and trends. To be a competitive and support the small farmer first Government need to aware them from competition and this can only be possible by making the local consumer well aware of the safety and nutrient value of liquid milk to force the existing producers and supply chain to upgrade and innovate, which in results exerts pressure to government to provide the testing, quality control, skills to the entire value chain.
Following steps are firstly required by government sector to establish well-defined Clusters: 1) Set and communicate an Dairy economic vision for each cluster with concrete timelines and road map for adopting cluster as an economic development mode

2) Assess and benchmark clusters through the natural advantage of input material. * Increase number of model dairy demonstration units. 3) Restructure programs and services to support clusters Government emphasizes collaboration involving multiple levels of government, companies and educational and research institutions. This would require a paradigm shift from traditional programs designed to ease access to general sources of capital, labour, equipment, subsidy, grants or markets, to new opportunities that promote inter-firm cooperation and the well-being of the cluster as a whole. Strengthen extension services to reach and educate maximum number of farmers 2) Launch mass scale awareness campaigns on management and production issues 3) Improve farmer access to financial services 4) Initiate sustainable long term breed improvement programs

4) Invest in learning The government investments must be driven by an understanding of global trends and what it takes to build a productive economy. 5) Promote Technology: * Facilitate technology transfer options within the region, especially between countries where operational standards as well as pricing and affordability are at par. * Where livestock imports are required to improve the domestic seed stock, animals from countries with similar climate and ecology should be imported. * Offer equipment and facilities related to cold chain at subsidized rates. 6) Dairy Farmers Association: * Organize farmers in groups at village levels and coordinate different activities * Create incentives for groups like subsidized chillers, feed mixing machines, etc. 7) Employment generation * Skill development trainings in milk supply chain management. * Implementation of Government rules of wages/work hours. * Impart micro enterprise development training & assist in setting up businesses.
Following diagram shows the policy frame work at each level of vale chain base on the sector situation analysis and for further up gradation of cluster knowledge and competitive productivity.

Below diagram illustrate the structure of Cluster and its operational diagram to achieve the desired out comes:

After developing the cluster as per above mentioned suggestion , the expected outcomes are to increase a productivity growth by local and available resources ,promoting innovation through public and private joint initiatives , and prosperity of whole location and one thing should be take care of that clusters have attracted the attention of government officials, business leaders, academics and practitioners alike to create a better competitive mix for sustainable profitability and social wellbeing.

References: * National Livestock Census, 2006. Agricultural Census Organization, Statistics Division, Government of Pakistan. * Punjab Livestock Census, 2006. Agricultural Census Organization, Statistics Division, Government of Pakistan. * Can Government Catalyze Clusters? Examples Of Government Actions , Prepared for the 6th Annual International Conference of The Competitiveness Institute, Gothenburg, Sweden, September, 2003 by Indira Singh. * “Clustering as a new growth strategy for regional economies? A discussion of new forms of regional industrial policy in the UK.” By Arnoud Lagendijk and David Charles, CURDS, Newcastle upon Tyne, UK.

References: * National Livestock Census, 2006. Agricultural Census Organization, Statistics Division, Government of Pakistan. * Punjab Livestock Census, 2006. Agricultural Census Organization, Statistics Division, Government of Pakistan. * Can Government Catalyze Clusters? Examples Of Government Actions , Prepared for the 6th Annual International Conference of The Competitiveness Institute, Gothenburg, Sweden, September, 2003 by Indira Singh. * “Clustering as a new growth strategy for regional economies? A discussion of new forms of regional industrial policy in the UK.” By Arnoud Lagendijk and David Charles, CURDS, Newcastle upon Tyne, UK.