2010

Pre-Feasibility Study on
Dairy
Farm in Sindh
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
SINDH

2010

DISCLAI
MER

This Pre-Feasibility has been prepared by Sindh Board of Investment (SBI) and
is for information purposes only. This report does not constitute an offer,
invitation or inducement to invest in any sector or industry. Neither the
information contained in this Pre-Feasibility nor any further information
made available with the subject matter contained herein will form the basis
of any contract. Any recommendations contained in this document must not be
relied upon as investment advice based on the recipient's personal
circumstances. In the event that further clarification is required on the words
or phrases used in this material, the recipient is strongly recommended to seek
independent legal or financial advice.

The material in this Pre-Feasibility is general information intended for recipients

who understand the risks and opportunities associated with making investment
in Sindh specifically in Dairy sector. It does not take account of whether an
investment, course of action, or associated risks are suitable for the recipient.

This report does not purport to be comprehensive or to contain all the

information on which a prospective investor can make an investment decision.
The information contained herein is based on publicly available information and
sources, which we believe to be reliable, but we do not represent it as accurate
or complete. The recipient of this report must make his own investigation
and assessment of the information presented herein. No representation,
warranty or undertaking, express or implied, is or will be made or given and no
responsibility or liability is or will be accepted by SBI or by any of its directors,
officers, employees, agents or advisors, in relation to the accuracy or
completeness of this Pre-Feasibility or any other written or oral information
made available in connection with the information presented herein. Any
responsibility or liability for any such information is expressly disclaimed.
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
SINDH

2010

EXECUTIVE SUMMARY

Brief summary of project is as follows.

1. For the establishment of Dairy Farm in Sindh, this feasibility has been
conducted.

2. The initial cost of the project is Rs. 124,447,500/-, including initial capital
cost of Rs. 123,170,500 and initial working capital of Rs. 1,277,000/-.

3. Projected Revenues for the project for year 1, year 2, year 3, year 4 and
year 5 is Rs. 36.06 million, 50.25 million, 62.7 million, 83.61 million and 107
million respectively.

4. Gross profit for year 1, year 2, year 3, year 4 and year 5 is Rs. 28 million, 40
million, 50.6 million,
68.7 million and 89.5 million respectively.

5. Payback period of the project is approximately 3.6 years.

6. Average Return on Investment is 19.28%.

7. The IRR of the project is 32.23%.

 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

Table of Contents
EXECUTIVE SUMMARY .................................................................................................................. 3

1 PROJECT BRIEF......................................................................................................................... 5
1.1 OBJECTIVES
......................................................................................................................... 5
1.2 OPPORTUNITY RATIONALE
.......................................................................................... 5

2 SWOT ANALYSIS ....................................................................................................................... 7

3 LIVESTOCK SECTOR OVERVIEW ........................................................................................ 9

3.1 THE PRODUCT: MILK
..................................................................................................... 11
3.1.1 Market Analysis - Demand & Supply for
Milk............................................................................. 12

3.1.2 COMPETITION - Domestic and International Markets

............................................................... 17

4 PROJECT COST ........................................................................................................................ 19

4.1 PROPOSED FINANCING MODEL
................................................................................ 19
4.2 PROPOSED LOCATION
.................................................................................................. 20
4.2.1 THE
LAND................................................................................................................................
.... 20

4.3 ANIMAL COST

.................................................................................................................. 20
4.4 SPACE & INFRASTRUCTURE
COST............................................................................. 20
4.5 HUMAN RESOURCE
REQUIREMENTS....................................................................... 21
4.6 VEHICLE & TRANSPORTATION REQUIREMENTS
................................................. 21
4.7 FURNITURE & EQUIPMENT COST
.............................................................................. 21

5 PROJECT DYNAMICS ............................................................................................................. 23

5.1 PROPOSED TARGET
MARKET...................................................................................... 23
5.2 DAIRY CATTLE BREED SELECTION FOR MILK
PRODUCTION........................... 23
5.3 SELECTION OF HERD SIZE &
COMPOSITION.......................................................... 24
5.4 MILK PRODUCTION & PROPOSED MILKING FREQUENCY
................................ 25
5.5 FEED COST
......................................................................................................................... 26
 5.6 VACCINATION AND ARTIFICIAL INSEMINATION COST ...................................
26
5.7 THE
PRICE.....................................................................................................................
..... 27

ANNEXURE L .................................................................................................................................... 28

ANNEXURE M – BALANCE SHEET ............................................................................................. 29

ANNEXURE N – PROJECTED CASH FLOW............................................................................... 30

ANNEXURE R - AVAILABLE LOCAL CATTLE BREEDS ....................................................... 31

ANNEXURE S - AVAILABLE FOREIGN CATTLE BREEDS.................................................... 32

 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

1 PROJECT
BRIEF

The proposed pre-feasibility is for establishment of Dairy Cattle Farm with

increase per cow milk production through state of the art farm management
facilities, efficient and effective utilization of dairy production and deployment
of technologically advance infrastructure. The project requires a unique mix of
technology and herd composition that will make it possible for investor to
achieve economies of scales and attain high rate of return on investment.

1.1
OBJECTIVES

This Pre-feasibility study aims at both financial and socio economic viability
with in-depth financial analysis and sustainable socio economic benefits to
establish small scale Dairy Cattle Farms in Sindh. The objective of this feasibility
is to provide a real time analysis of the market opportunity with factual data
that will lead towards overall improvement in dairy sector of economy.

1.2 OPPORTUNITY
RATIONALE

Milk is among the most important consumable and marketable commodities

of the world with enormous demand in domestic and international market.
Buffalo is the main source of milk in domestic dairy industry whereas cow is the
main source of milk in international market.

Dairy sector possess potential of additional 3 billion liters of milk with a growth
rate faster than any other sector of economy. The scope for export of value
added derivatives of milk is also huge especially processed milk market
share has increased considerably. Technologically advanced production,
processing and storage facilities have made it possible to preserve Milk and its
value added products for longer period of time but in Pakistan, only around 3%
of total milk production is processed and marketed through formal channels.
 rd
Although per animal milk yield in lower than other countries, Pakistan is the 3
largest milk producing country in the world. Increase in milk production is due to
increase in quantity of livestock population
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

1
in Pakistan from 716.7 million to 769 million in 2010 . It is also required to
introduce improved technological methods in dairy farming industry to increase
per animal milk production and attain economies of scales.

This provides huge opportunity with minimal competition for farmers to invest in
dairy farming and milk processing sectors of the economy.

1
Economic Survey of Pakistan 2009 - 2010
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

2 SWOT ANALYSIS
A SWOT analyses for establishing a dairy farm is given below.

Strengths

• Livestock products i.e. Milk & Meat are major source of food.
• Dairy sector is having enormous potential for sizeable earnings
• Pakistan is having wide scope of Milk Production, ranking 3rd in the world
• Dairy sector in Sindh is having low cost of production compare to
competitive milk producing countries
• Ample human resource and manpower availability in dairy farming
• Sindhi culture is having long tradition of cattle and livestock rearing
• Large base of cattle for milk production

Weaknesses

• Relatively small dairy cattle milk production market

• Chronic lack of improved, adapted dairy cows
• Unorganized sector, unaware of basic farm management practices
including record keeping, farm/ market infrastructures & marketing
information
• Nutrition is still a problem hampering the livestock productivity in general and
milk production in particular
• Enormous production losses due to endemic diseases every year
• Poorly developed cold chain with inadequate number of milk chilling and
processing centers
• Lack of education, technical skills, initiative and experience in modern dairy
farming
• Adoption of traditional approach
• Post harvest milk losses are very high estimated at 40 kg per capita per year
• Obsolete equipment and technologies

Opportunities

• Increasing demand of value added dairy products

• Local and global dairy products needs are much higher than supply
• Govt. of Sindh & State Bank of Pakistan priority sector
• Commercially viable sector with great credit potential and absorption capacity
• Cooperatives can play a big role for development of dairy sector in Sindh
• Dairy sector provides raw material for food & leather industry

Threats

• Implementation of WTO will result in open & competitive commodity pricing

• Due to fear of default, banker community has reluctance for lending loans
• High risks of diseases in live stock
• Defective and unorganized markets
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

• Imbalance between prices of inputs & outputs

• Rising trend of cost of production with higher rate of interest as compared to
profit ratio
• Lack of media projection, non-recognition of problems and monopoly of
multinationals
• Lack of community organizations and out dated farm practices
• Lack of coordination towards common causes & goals
• Lack of awareness about economics, demand & supply in market
• Low saving, low holding capacity
• Non-availability of subsidy, tax holidays
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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3 Livestock Sector Overview

Livestock products constitute huge revenue potential. Livestock sector

produces the following products:

• Milk
• Beef
• Mutton
• Poultry Meat
• Wool
• Hair
• Bones
• Fat
• Eggs
• Skins

This sector has shown steady progress in last few years. Detailed livestock
growth percentage is shown in table below:

Livestock Growth Percentage

Yea Livesto
r ck
2003‐ 2.9
04 %
2004‐ 2.3
05 %
2005‐ 15.8
06 %
2006‐ 2.8
07 %
2007‐ 4.2
08 %
2008‐ 3.5
09 %
2009‐ 4.1
10 %
Source: Federal Bureau of Statistics

Livestock population in Pakistan is mainly comprised of Cow, Buffalo,

Sheep, Goat, Camel and
Poultry. Around 47% of the rural households in Pakistan own livestock and 11%
of their income
2
come from livestock.” According to Livestock Census 2006, 52% of total
cattle population of
2
Per Capita Meat Consumption Declines by 1.7%, The News, February 20, 2010
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

Pakistan resides in Punjab, 19.7% in Sindh, 20% in NWFP and 8% in

3
Baluchistan. Detailed
comparison of increase in Livestock population in Pakistan is given in graph
below:

Livestock Population in Pakistan

700 34
33
600 32
31
500 30
All Values are in

24
400 23 23 24 610
22 56
300
51 2
43 47
Millions

200 37 8
33 34 35 3 7
29 2
100 0 6 3
2
0 31
23 24 25 26 26 27 28 29 29
2000- 2001 2002 2003 2004- 2005 2006 2007 2008 2009-
2001 - - - 2005 - - - - 2010
200 200 200 200 200 200 200
2 3 4 Year 6 7 8 9

Buffaloes Poultry Cattle

Source: Ministry of Livestock and Dairy Development

In 2009-2010, Livestock sector produces 36,299,000 tonnes of milk, making

rd
Pakistan 3 largest milk producing country in the world. It also produces
1,655,000 tonnes of Beef, 603,000 tonnes of Mutton, 707,000 tonnes of
Poultry Meat, 40,000 tonnes of Wool, 22,600 tonnes of Hair, 713,400 tonnes of
Bones, 228,100 tonnes of Fat, 56,800 tonnes of Blood, 11,839,000,000 tonnes of
Eggs and
47,400,000 tonnes of Skins in
4
2009-2010.
3
M. Sajjad Khan, Zia-Ur Rehman , Muqarrab A. Khan and Sohail Ahmad, Genetic Resources and
Diversity in Pakistani
Cattle, Department of Animal Breeding and Genetics, University of Agriculture Faisalabad; Pakistan
Vet. J., 2008, 28(2): 95-
102.
4
Ministry of livestock & Dairy Development: Figures are based on Inter census growth rate of
Livestock census 1996 &
2006
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
SINDH 2010

Year-wise livestock production of Pakistan is given below:

Yearwise Livestock Production of Pak istan

590 603
40 ,00 0 57
55 56
6 8
35 ,00 0 73 4
70 72
30 ,00 0 66 68 9
2 0
6 3
25 ,00 0
All Values in 000

35 ,1 0 36 ,29
20 ,00 0 6 9
31,970 32,996 34 ,06 4
28 ,62 4
15 ,00 0 26,284 27,031 27,811
29 ,43 8
Tonnes

10 ,00 0
5,00 0
1,03 1,06 1,08 1,11 1,44 1,49 1,54 1,60 1,65 5
-
4 0 7 5 9 8 9 1

1,01 0

Ye ar
Beef Milk Mutton
Source: Economic Survey of Pakistan 2010

Livestock accounted for 53.2% of agriculture value added and 11.4% of

national GDP during
5 6
2009‐10. It also comprised of 8.5% of total national export. Gross value
addition of livestock at current factor cost has also increased from Rs.
1,304.6 billion (2008‐09) to Rs. 1,537.5 billion (2009‐10) showing lift of
7
17.8% as compared to previous year.”

3.1 THE PRODUCT:

MILK

Raw milk is used to prepare processed milk and various value added products.
Some of them are as follows:

• Pasteurized
Milk
• UHT Treated
Milk
• Condensed
Milk
• Skim
Milk
• Milk
Powder

5
Economic Advisor’s Wing 2008
6
Pak. J. Agri. Sci., Vol. 45(2),2008
7
Economic Survey of Pakistan 2009-2010
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

Ghee
• Liquid
butter
•

Yogurt
• Ice
Cream
•

Butter
•

Cheese

3.1.1 Market Analysis - Demand &

Supply for Milk

Developing Markets contribute greatly in the milk production and

consumption markets of the world. Brief overview of local and international
market conditions, demand and supply is given below:

Demand for Milk in Domestic and

International Market

According to Tetra Pak index, global consumption of milk and other liquid dairy
products (excluding soy and dairy alternatives) reached an all-time high of 258
billion litres in 2008 whereas including soy milk and other dairy alternatives, such
as rice, nut and seed-based milks, consumption becomes 280
billion litres. Projected dairy consumption in 2012 is
282 billion litres.

Dairy Consumption in the World

290 282
280 27
27 6
270 26 0
All Values are in

25 3
260 25 8
24 4
Billion
Litres

250 24 8
2

240

230

220
200 5 200 6 200 7 200 8 200 9 201 0 201 1 2012
 Source: Tetra Pak Dairy Ye ar
Index, 2009

Worldwide dairy consumption will continue to grow at a compound annual growth

rate of 2.2% until
8
2012. Chilled and Ambient RTD are most valuable milk products in international
market.

8
Tetra Pak Dairy Index, Issue 1 - June 2009
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

Year Wise Dairy Demand in the World

97. 99.0
7
100.0 94. 95. 94. 95. 96.7
93. 7
7 8 9
4
77. 77. 78.
80.0 76. 76. 76.
8 8 1 72.8
6 8 69.
All Values are in Billion

76.2 76.1 2 66.

2 6
9 62.3
55 59.
60.0 518 3
.
482 .
.

40.0
Litres

20.0 28. 29. 30. 32.1

24. 26. 27.
25. 1 7 9
2 2 1
5

0.0
2005 2006 2007 2008 2009 2010 2011 2012

Year

Loos e Powder Chi l l ed Ambi ent RTD

Source: Tetra Pak Dairy Index, 2009

China is the world’s leading market in consumption of flavored milk, liquid
cultured milk and soy milk with compound annual growth rates over the last
three years.

The global average per capita milk consumption is 82.1 kg per annum. Buffalo is
the main source of milk in local industry whereas Cow is mainly used for milk
production in international market. Top ten per capita cow’s milk and cow's milk
products consumers are defined in chart below:

Top Ten Per Capita Cow's Milk and Cow's Milk Products
Consumers in 2006
Country Milk (In Litres)
Finland 183.9
Sweden 145.5
Ireland 129.8
Netherlands 122.9
Norway 116.7
Spain 119.1
Switzerland 112.5
United Kingdom 111.2
Australia 106.3
Canada 94.7
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

In Pakistan, daily human milk consumption in 2009-2010 was 36.29 million tones:

Milk Human Consumption (All values are in 000 tons)

Item 2007-08 2008-09 2009-10
Milk (Human 34,064 35,160 36,299
Consumption)
Cow 11,550 11,985 12,437
Buffalo 20,991 21,622 22,279
Sheep 35 36 36
Goat 700 719 739
Camel 787 798 808
Source: Ministry of Livestock and Dairy Development

Milk and milk equivalents are having second highest level of per capita
consumption in Pakistan with almost double of global average i.e. 158.3 kg
registering an increase of 2.3 percent. The annual per capita consumption of
milk at national level is 190 liters. Province wise per capita consumption is as
follow
s:

Province Wise Per Capita Milk

Consumption
Province Per Capita
Consumption
Sindh 246
kg Punjab 132
Kg NWFP 86 Kg
Baluchistan 108
Kg
Source: Consultancy Report, October 2007

Supply for Milk in Domestic and International Market

Detailed statistics of world annual milk production is shown below.

World Milk
Production
Rank Count Production (billion kg/y)
ry
1 Indi 114.
a 4
2 United 79.3
States
3 Pakista 36
n
4 Chin 32.5
a
5 German 28.5
y
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

6 Russi 28.5
a
7 Brazi 26.2
l
8 Franc 24.2
e
9 New 17.3
Zealand
10 United Kingdom 13.9
11 Ukrain 12.2
e
12 Polan 12
d
13 Netherlan 11.5
d
14 Italy 11
15 Turke 10.6
y
16 Mexic 10.2
o
17 Australi 9.6
a
18 Egyp 8.7
t
19 Argentin 8.5
a
20 Canad 8.1
a

India ranks first in the world, both in total milk production and total milk
consumption. In 2008, milk consumption in India was up more than 2.6% from
2007 to nearly 51.5 billion litres. Over the past four years milk consumption in
India has risen by a compound annual growth rate of 2.7% with packed milk
9
growing by a compound annual growth rate of 4.7% over the same period.”
U.S. cows' milk production is the largest of any individual country in the
world, with 189.7 billion pounds produced in 2008.
Annual Milk Production in Pakistan is
given below:

Pakistan Annual Milk Production

35 36 36
45000
40000
35000
27 ,02 27 ,84
26 ,23
All Values in 000

30000 8
1 8
25000
20000
15000 700 719 739
10000
Tons

14 ,43 14 ,98 15 ,54

5000 2 6
7
0 787 808
798
2007-08 2008 -09 2009 -10

Ye ar
Camel Cow Goat Buffalo Sheep

Source: Ministry of Livestock and Dairy Development

9
Tetra Pak Dairy Index, Issue 1 - June 2009
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN SINDH
2010

Due to high local demand, milk produced in Pakistan is mainly used for local
consumption in the form of raw milk. In local market, both demand and supply of
milk have shown increasing trend over the last decade. Urban demand for milk in
Pakistan is estimated at 9-12 million litres whereas urban supply of milk
constitutes only 5% to 15% of the total milk production of the country.

Local demand for milk increases during summers as the consumption of whey
(lassi), yogurt, and ice cream rises due to hot weather. Local consumers are
price conscious due to rising inflation and high poverty levels. Therefore primary
dairy product in domestic market is raw milk. In local market, over
90 percent of the milk is collected and marketed unprocessed through informal
channels by a multi tiered layer of intermediaries. Only 3%-5% of total milk
production goes into processing industry for value added production.

Although local milk supply is increasing but the Gap between supply and
demand has gradually widen over the years. To meet this gap, powdered milk is
imported every year. During July 2006 to November 2007, dairy products worth
Rs. 2320.42 million ($38.6 million) were imported in Pakistan.
The Statistics Division lists the product only as ‘Milk and Milk
10
Food for Infants’.

Domesti c Mi l k Suppl y & Demand Gap i n Domesti c Mi l k Suppl y & Demand Gap i n
2003 2020

Gap ,
3,520
11% Gap
Sup p ly 55,480 Supply
27,800 56% 43,430
89% 44%

Supply Gap Supply Gap

Source: Livestock Department,
Government of Sindh
10
Umm e Zia, Consultancy Report, October 2007, CFC/FIGMDP/16FT, Improved Market Access and
Smallholder Dairy
Farmer, Participation for Sustainable Dairy Development, Lessons Learned Study - Pakistan
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

3.1.2 COMPETITION - Domestic and

International Markets

Milk is a cashable commodity. Dairy market in world provides huge potential

for milk value added products. It is extremely important to understand that milk
production is not related to milk import in international market because some of
high milk producers are high milk consumers as well.

World largest importer of dairy products is Japan whereas New Zealand is the
world largest dairy export nation with bulk of international trade in the form of
processed dairy products such as milk powder. Internationally global milk
supply is contracting due to EU Quota restrictions, climatic changes in New-
Zealand/Australia and high rate of growth in Asian milk consumption.

In Pakistan, Dairy sector remains informal and disorganized resulting in fewer

profits for the farmers and gap in supply and demand. Huge losses are faced
by farmers due to improper transportation and unavailability of interconnected
cold chains etc. Dairy farming is common in rural areas of Pakistan therefore
major production of milk is from rural areas. Household herd size in rural areas is
defined in table
below:

Household Herd Size in Pakistan

Household Percentage Animal Count
51% 1-4
28% 5 to 10
14.23% 11 to 50
6.72% more than 50
Source: Livestock Census held in 2006

The comparative value of milk in Pakistan is 60% higher than both wheat and
cotton together. Gulf has long been an important business partner of
Pakistan, importing up to 90 per cent of the country's dairy and agricultural
11
produce. Top 10 dairy companies in the world produced 22.4% of total dairy
12
products supply in the world. Dairy companies are introducing innovative
products in organic and functional dairy sector. Low fats and no preservatives
products are also getting increase
popularity and demand in
international market.

11
Pakistan Veterinary Journal, 2009
12
IFCN Dairy Report 2009
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

Currently, there are more than 25 dairy processing plants operating in the
country. Some major market players are as follows:
• Nestle Pakistan
• Tetra Pak
• Engro Foods
• Millac Foods
• Noon Pakistan Limited
• Prime Dairies
• ShakarGunj Foods
• Royal Dairy
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

4 PROJECT COST
Initial cost of the project has been estimated as follows.

Project
Description
Cost Total Cost
Initial Capital
Land Cost 3,000,000
Building/Infrastructure 63,028,000
Furniture 1,628,500
Animals 35,500,000
Machinery & equipment 17,614,000
Office vehicles 2,200,000
Pre-operating cost 200,000
Total Capital Costs 123,170,500
Initial Working
Administrative Salaries forCapital
3 months 240,000
Labor Salaries for 3 months 144,000
Electricity (for 3 months) 240,000
Gas (for 3 months) 3,00
Petrol (for 3 months) 0
90,00
Fodder Inventory 0
60,00
Cash in Hand 0
500,000
Total Working Capital 1,277,000
Total Project Cost 124,447,500

4.1 PROPOSED FINANCING MODEL

The proposed pre-feasibility is based on the assumption of 50:50 debt equity

ratios.

Project Financing Model (Debt to Equity

Ratio)
Borrowing 50 62,223,750
%
Equit 50 62,223,750
y %
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

4.2 PROPOSED LOCATION

The proposition is to establish small scale commercial dairy farms on 5 acres of

land. The proposed location of the project is in Bhambore, Thatta in Sindh.

4.2.1 THE LAND

3 acres of Land is leased at Rs. 3,000,000 near Bhambore.

4.3 ANIMAL COST

Initial animal cot is given in table below:

Animal
Typ Quantity Cost
Per Unit Cost Total Cost Year
Calf e
(1 10 100,000 0 1,000,000
year)
Heifer 40 250,000 10,000,000
Cow 70 350,000 24,500,000
Tot 12 35,500,000
al 0

4.4 SPACE & INFRASTRUCTURE COST

Space & infrastructure required for the project is as follows:

Space
Requirement
Quantit Total Rate
Item Sq Total
y Space / Sq
ft Cost
Shed along with free stall for 100 Require
240 Required
24,000 ft
1,100 26,400,00
cows
Milking Sheds for cows 50 128 6,40 1,100 07,040,00
Cage for Calves (upto 15 days) 20 40 0
800 700 0560,000
Calves shed (15 days - 1 year) 30 50 1,50 400 1,050,00
Servant Room 150 10 0
1,50 600 0900,000
Stores for fodder, concentrate & 0
200 4 800 500 40,000
machine room
Office Room 3000 300 800 2,400,00
Overhead Water Tank 1000 0- 0300,000
Gallon
Underground Water Tank 1000 - 300,000
Gallon
Caffing Machines 15 4 60 400 24,000
Utensils & Milk storage 40 4 160 400 64,000
Wash Room 150 5 750 900 675,000
Covered Area 38,920 40,088,0
00
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

Uncovered Area 91,760 250 22,940,00

Total land 130,680
13 0
63,028,0
00

4.5 HUMAN RESOURCE REQUIREMENTS

Human Resource required for the project is as follows.

Human Resource Requirements

Description Qty Salary/Month/Person Annual Salary (Rs)
Farm Manager 1 30,00 360,00
Technician 1 0
12,00 0
144,00
Clerks/Compounder 2 0
10,00 0
120,00
Guards 3 0
7,00 0
252,00
Farm Labor 6 0
8,00 0
576,00
0 0

4.6 VEHICLE & TRANSPORTATION REQUIREMENTS

Transportation requirements for the project are as follows.

Initial Vehicle
Item Qty PerCost Amou
Car 1 Unit
800,00 nt
800,00
Shehzore 1 0
1,400,00 0
1,400,00
Total 2 0
2,200,0 0
2,200,0
00 00

4.7 FURNITURE & EQUIPMENT COST

Furniture & equipment required for the project is given in tables below.

Furniture
Item Cost Quantit Rate Total Cost
Chains y 17 300 52,50
Milking Buckets 5
50 200 0
10,00
Electric Caffing Machines with Implements 4 25,00 0
100,000
Milking Cans 30 01,500 450,000
Office equipments 0 1,000,000
Water pumps 8 2,000 16,00
Total 0
1,628,500

13
1 acres = 43,560 sq feet, 3 acres of land is equals to 130,680 sq ft.
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
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2010

Farm Machinery & Equipment Cost

Capaci
Total
Farm Rat ty Qty
Cost
Supplies e (No.
(Rs
of
Milking machine (Vacuum Line 1,800,000 8 14,400,00
System) 0
Milk Cooling Unit - 1000 Litres 450,000 3 1,350,000
Farm tractor 500,000 1 500,000
Calf feeder 1,200 5 10 12,000
Teat Dip Cup 35 20 7,000
Maize Cutter 0
200,000 10 2 400,000
Generator 200,000 0 1 200,000
Tube Well 150,000 1 150,000
Heavy Duty Ventilation Fans 1,500 330 495,000
Testing lab 100,000 50 1 100,000
Total Farm Equipment Cost 0 17,614,0
00
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
SINDH

2010

5 Project Dynamics
5.1 PROPOSED TARGET MARKET

This pre feasibility study suggests that raw milk will be sold on farm gate to
following target clients:

• Local people
• Gawalas
• Milk collection companies
• Contractors
• Milk processors
• Dairy Companies

5.2 DAIRY CATTLE BREED SELECTION FOR MILK

PRODUCTION

Selection of Cattle breed for farm is extremely important due to the

following reasons:

• Lactation Period: Lactation period for various breeds differ that will have
direct impact on farm revenues.

• Size of Cow: Large cows generally produce more milk than small cows, but
milk yield does not vary in direct proportion to body weight. Rather, it
varies by the 0.7 power of body weight, which is an approximation of the
surface area of the cow (metabolic body size). A cow which is twice as large
as another usually produces only about 70% instead of 100% more milk.

• Milk Production Capacity: Certain breeds produce more milk than others;
however, different breeds produce within a range of around 2,000 to
over 10,000 kg of milk per annum. Comparative analysis of milk
production capacity for various cattle breeds is given below:

Comparative Analyses of Dairy Cattle Breeds

Breed Milk Yield Lactation

14
Ayrshire (Kg/Y)
6,20 Period-
Jersey 0
5,00 310
Guernsey 0
5,50 305
Brown Swiss 0
6,18 -
Shorthorns 0
6,70 305
Australian Friesian Sahiwal 0
3,000-5000 280
Sahiwal 2,27 300
0
14
Milk yield increases (at a decreasing rate) until about the 8th year of age and then decrease at an
increasing rate.
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
SINDH

2010

Frieswal 4,80 326

Holestein-Friesian 90008to15,385 36
Red Sindhi 190 5
265
Cholistani 0
1,18 165
Tharparkar/White Sindhi 8
1,66 305
Kankrej 0
1,50 300
0

5.3 SELECTION OF HERD SIZE & COMPOSITION

• The Pre-feasibility study suggests an initial herd size of 120 animals, which
is economical to justify the overhead cost.

• The farm size will increase to about 320 Cattle within 10 years.

• Herds mix of 8% calves, 34% heifer and 58% cows are

recommended to get maximum production life and milk production round
the year. Combination of herd is selected because mature cows produce
about 25% more milk than 2-year-old heifers.

• Thorough studies have been conducted to select dairy breed for the farm.
Holstein has been selected as the proposed breed for the project. The
Cattle breed for the project have been selected according to target market
requirements, better fertility, better adapted to heat-stress and other
stressful conditions, along with overall economic performance.

• Detailed herd composition is given in table below:

Herd Composition
Item and1Size
Year Year 2 Year 3 Year 4 Year 5
Calf (4 months -1 year) 10 30 33 35 42
Heifer 40 10 30 33 35
15
Cow 70 110 120 150 184
16
Lactating cow 11 120 150 184 218
No of female calves (0-4 0
51 55 69 85 101
17
months)
No of male calves (0-4 months) 51 55 69 85 101
Total Animal 22 261 323 388 462
Less Calves Sold 2
71 78 97 119 141
Total Herd Size 15 184 225 269 321
0

15
Calving Interval is taken as 13 months.
16
It is a key assumption fro this feasibility that 80% of lactating cow will produces calves after insemination.
17
Calves sex ratio probability is 50:50
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN SINDH
2010

5.4 MILK PRODUCTION & PROPOSED MILKING

FREQUENCY

In dairy farming, dairy cow is the milk producing machine Dairy cows produce
milk when they give birth to calves. It is extremely important to understand
dairy cow lifecycle because it has direct impact on revenues.

• A cow will produce large amounts of milk over

its lifetime.

• Production levels peak at around 70 days

after calving.

• The cow is then bred. Production declines steadily afterwards, until, at

about 305 days after calving, the cow is 'dried off', and milking ceases.

• About sixty days later, one year after the birth of her previous calf, a cow
will calve again. High production cows are more difficult to breed at a one
year interval. 13 or 14 month cycles are more appropriate for high
production cows.

• Local farmers milked cows twice a day. The long interval between milking
might not be optimal for the welfare of high yielding cow. It points to a need
for increasing the milking frequency to 3 times per day. Therefore in the
proposed project, animals are milked thrice a day.

• Year wise projected milk production is

given below:

Milk
Milk Milk Production
Milk Total Milk
Milk
Year Item in in in Milk Used
for
Litres Litres Litres Producti by
Sal
Heifer Per
1,200 Per
36,000 Per
144,000 on Calve
Year 1 19 774,000 48,738 725,262
Cow 2,100 63,000 630,000
Heifer 30 9,000 36,000
Year 2 1,026,000 53,169 972,831
Cow 0
3,300 99,000 990,000
Heifer 91 27,415 109,662
Year 3 1,189,662 66,666 1,122,99
Cow 4
3,600 108,000 1,080,00 6
Heifer 99 29,908 029,908
Year 4 1,473,785 81,390 1,392,39
Cow 7
4,514 135,415 135,454
5
Heifer 1,042 31,250 124,999
Year 5 1,778,230 96,774 1,681,45
Cow 5,511 165,323 1,653,23
5
1

18
A day old calf can only drink around 2 litres of milk per day; at 8 weeks, a calf will only be
consuming around 6 litres per day. In dairy farms, most young stock subsists on commercial milk
 replacer after few days of their birth due to economic advantages. Milk replacer is feed based
on dried milk powder and reconstituted using hot water. Milk replacer is cheaper than cow
milk.
19
Per day milk production per cow is taken as 30 litres.
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN SINDH
2010

5.5 FEED
COST

Dairy cattle will feed on protein sources (concentrate) along with plenty of green
fodder. According to estimates cow consumes about 40-45 kg of fodder daily.
Feed cost for proposed project is given below:

Grass/H
Gras Cost Per Cow ay
Amount Amount Amount
Qty
s/ Per Per Per Per
Hay 1
Year Da
50 120 Da
6,00 Mont
180,000 Yea
2,160,000
Year 2 54 150 0
8,05 241,491 2,897,889
Year 3 57 184 0
10,515 315,464 3,785,568
Year 4 61 218 13,378 401,350 4,816,202
Year 5 66 261 17,093 512,793 6,153,512

Concentr
Cost Per Rate ate Total
Concentrat Total Per Total Per
Cow (In Per
e Day Year
Year 1 Per
70 Rs
12 8,40 Mont
252,000 2,520,000
Year 2 75 0
15 0
11,270 338,087 3,380,871
Year 3 80 0
18 14,722 441,650 4,416,496
Year 4 86 4
21 18,730 561,890 5,618,903
Year 5 92 8
26 23,930 717,910 7,179,098
1

Total Feed
Yea Cost Amou
r
Year nt
4,680,000
1
Year 6,278,760
2
Year 8,202,064
3
Year 10,435,105
4
Year 13,332,610
5

5.6 VACCINATION AND ARTIFICIAL

INSEMINATION COST

Vaccination Cost for a single cow would be Rs 1500/- whereas cost of

artificial insemination is estimated at Rs 4000/- per cow. Detailed table for
vaccination and artificial insemination is given below:

20
7% Inflation Rate is taken for cost estimation
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN
SINDH

2010

Vaccination and Artificial Insemination Cost

Yea Vaccination Artificial Insemination Total Cost
21 22
r 1
Year Cost332,30 (AI) 440,00 772,308
Year 2 8
391,84 0
480,00 871,846
Year 3 6
483,87 0
601,84 1,085,716
Year 4 0
581,96 6
734,76 1,316,734
Year 5 4
693,62 9
873,65 1,567,284
7 7

5.7 THE PRICE

• In Pakistan, milk is mainly consumed in two ways i.e. loose and packed.
Price for both varies greatly because packed milk goes through more stages
of production and price of milk increases by one rupee per litre at every stage
of sale.

• Growing demand for dairy products in Asia is driving global milk prices. The
world milk price ranged between 13.8 and 46.2 US-$/100 kg milk in the period
1996-2009.

• The historical high in 2007 was followed by a rapid decrease of the milk
23
prices, returning to below 20 US-$/100 kg at the beginning of 2009.

• This prefeasibility suggests that milk will be sold at the farm or may be
directly sold in the urban market. The milk price varies according to its
quality and the season. Cow milk is sold at Rs. 42 per liter at the farm gate.
Detailed proposed pricing for this project is depicted in Table below:

Price
24
Item Year Year Year Year Year 5
Farm gate price per liter milk 142 245 348 451 55
Per unit price of male calves 50,000 53,500 57,245 61,252 65,540
Per unit price of female 50,000 53,500 57,245 61,252 65,540
calves

21
Per Cow vaccination Cost is estimated as Rs. 1500/-
22
Per Cow Artificial Insemination cost is estimated as Rs. 4000/-
23
IFCN Dairy Report 2009
24
Inflation Rate per year is taken as 7% for price determination.
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN SINDH 2010

Annexure
L All Values are
in Rs

Projected P/L Account for

Next 5 Years

S No Particulars Detail Year Year 2 Year 3 Year Year

s 1 4 5
A Sales L-1 36,061,846 50,256,748 62,771,260 83,618,414 107,807,905

B Less Cost of Goods L-2 7,828,308 9,746,926 12,125,242 14,853,263 18,290,292

Sold
C Gross Profit 28,233,538 40,509,822 50,646,018 68,765,151 89,517,612

D Less Operating Costs

Administrative Expense L-3 10,523,750 10,589,270 10,659,376 10,734,390 10,814,655

E Operating Profit 17,709,788 29,920,552 39,986,642 58,030,760 78,702,957

F Less Financial Charges L-4 2,277,853 2,762,654 3,352,771 4,071,235 4,946,127

G Net Profit Before Tax 15,431,936 27,157,897 36,633,871 53,959,525 73,756,830

J Provision for Income 5,401,178 9,505,264 12,821,855 18,885,834 25,814,891

Tax
K Net Profit/Loss After 10,030,758 17,652,633 23,812,016 35,073,691 47,941,940
Taxes
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN SINDH 2010

Annexure M – Balance Sheet

Item Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Current Asset
Cash & Bank 1,217,000 18,483,656 42,988,447 73,053,767 113,654,825 166,224,592
Inventory 60,000 234,000 313,938 410,103 521,755 666,631
Pre-Operating Expense 200,000 160,000 120,000 80,000 40,000 -
Animal 35,500,000 35,500,000 39,050,000 42,955,000 47,250,500 51,975,550
surplus of animals
Net Value of Animals 35,500,000 35,500,000 39,050,000 42,955,000 47,250,500 51,975,550
Total Current Assets 36,977,000 54,377,656 82,472,385 116,498,870 161,467,080 218,866,772
Fixed Asset
Land 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000
Furniture 1,628,500 1,465,650 1,302,800 1,139,950 977,100 814,250
Building/Infrastructure 63,028,000 56,725,200 50,422,400 44,119,600 37,816,800 31,514,000
Machinery & Equipment 17,614,000 14,971,900 12,329,800 9,687,700 7,045,600 4,403,500
Vehicle 2,200,000 1,760,000 1,320,000 880,000 440,000 -
Total Fixed Assets 87,470,500 77,922,750 68,375,000 58,827,250 49,279,500 39,731,750
Total Assets 124,447,500 132,300,406 150,847,385 175,326,120 210,746,580 258,598,522
Liabilities & Shareholders' Equity
Current liabilities - 12,252,258 11,774,457 11,191,830 10,481,380 9,615,064
Accounts payable - - - - - -
Total Current Liabilities - 12,252,258 11,774,457 11,191,830 10,481,380 9,615,064

Long Term Debt 62,223,750 60,045,897 57,390,243 54,151,962 50,203,231 45,388,184

Shareholders' equity
Paid-up capital 62,223,750 62,223,750 72,254,508 93,457,142 121,174,158 160,543,349
Gain/ (Loss) on revaluation of animals - - 3,550,000 3,905,000 4,295,500 4,725,050
Retained Earnings 10,030,758 17,652,633 23,812,016 35,073,691 47,941,940
Total Equity 62,223,750 72,254,508 93,457,142 121,174,158 160,543,349 213,210,338
TOTAL CAPITAL AND LIABILITIES 124,447,500 132,300,406 150,847,385 175,326,120 210,746,580 258,598,522
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN SINDH 2010

Annexure N – Projected Cash Flow

Item Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Operating activities
Net profit - 10,030,758 17,652,633 23,812,016 35,073,691 47,941,940
Add: Depreciation expense - 9,547,750 9,547,750 9,547,750 9,547,750 9,547,750
Amortization expense - 40,000 40,000 40,000 40,000 40,000
Raw material inventory (60,000) (174,000) (79,938) (96,165) (111,652) (144,875)
Cash provided by operations (60,000) 19,444,508 27,160,445 33,303,601 44,549,789 57,384,814
Financing activities
Change in long term debt 62,223,750 (2,177,853) (2,655,654) (3,238,281) (3,948,731) (4,815,047)
Change in short term debt
Add: land lease expense 0 0 0 0 0 0
Land lease payment 0 0 0 0 0 0
Issuance of shares 62,223,750 0 0 0 0 0
Cash provided by / (used for) financing
activities 124,447,500 (2,177,853) (2,655,654) (3,238,281) (3,948,731) (4,815,047)
Investing activities
Capital expenditure (123,170,500)
Cash (used for) / provided by investing
activities (123,170,500)
NET CASH 1,217,000 17,266,656 24,504,791 30,065,320 40,601,058 52,569,767
Cash balance brought forward 1,217,000 1,217,000 18,483,656 42,988,447 73,053,767 113,654,825
Cash available for appropriation 18,483,656 42,988,447 73,053,767 113,654,825 166,224,592
Dividend 0 0 0 0 0 0
Cash carried forward 1,217,000 18,483,656 42,988,447 73,053,767 113,654,825 166,224,592
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN SINDH 2010

Annexure R - AVAILABLE LOCAL CATTLE

BREEDS
Pakistan is home tract of some of the finest breeds of cattle. All the indigenous cattle of
Pakistan belong to zebu (humped type) cattle (Bos Indicus). There are 15 recognized breeds
25
of cattle in the country which constitute 43% of the total cattle population.

Brief introduction of available local Cattle breeds in the region is given below
for herd selection.

1. SAHIWAL:

1.1. Mainly found in Punjab

1.2. Milk yield Under village condition is 1350 kgs whereas under commercial farms is
2100 kgs
1.3. Age at first calving -32-36 months
1.4. Calving interval – 15 month

2. THARPARKAR:

2.1. Mainly found in Tharparkar and surrounding areas

3. RED SINDHI:

3.1. Mainly available in Punjab

3.2. Milk yield Under village condition is 1100 kgs whereas under commercial farms is
1900 kgs

4. KANKREJ:

4.1. Mainly found in Southwestern part of Tharparkar

4.2. Milk yield Under village condition is 1300 kgs whereas under commercial farms is
3600 kgs
4.3. Age at first calving -36 to 42 months
4.4. Calving interval – 15 to 16 months
25
Genetic Resources and Diversity in Pakistani Cattle, 2008
 PRE-FEASIBILITY STUDY ON DAIRY FARM IN SINDH 2010

Annexure S - AVAILABLE FOREIGN CATTLE

BREEDS
1. HOLSTEIN FRIESIAN:-

1.1. This breed is from Holland

1.2. Holsteins are black and white, and each has a unique pattern.
1.3. It can perform well in coastal and delta areas.
1.4. A Holstein calf weighs 80-110 lbs. at birth.
1.5. A mature Holstein cow weighs 1,300-1,500 lbs.
1.6. Milk yield - 7200-9000 kgs
1.7. This is by far the best diary breed among exotic cattle regarding milk yield. On
an average it gives 25 litres of milk per day whereas a cross breed H.F. cow gives
10 - 15 litres per day.

2. JERSEYS:

2.1. Jerseys vary from dark brown or fawn, and sometimes are splashed with white.
2.2. Well acclimatized especially in the hot and humid areas
2.3. A Jersey calf weighs around 60 lbs. at birth.
2.4. A mature Jersey cow weighs 900-1,000 lbs.
2.5. Cows are milked for an average of 3-4 years
2.6. Age at first calving is 26-30 months
2.7. Calving interval is 13-14 months
2.8. Dairy milk yield is found to be 20 litres whereas cross bred jersey, cow gives 8-10
litres per day.

3. BROWN SWISS:

3.1. Produces the second largest quantity of milk per annum, around 9000kg.
3.2. The milk contains on average 4% butterfat and 3.5% protein, making their milk
excellent for production of cheese.
3.3. The Brown Swiss is known for a long gestation period, immense size, large furry
ears, and an extremely docile (though some would say lethargic) temperament.
3.4. It is quite a resilient breed of cattle; they are hardy and capable of subsisting with
little care or feed.
3.5. They are resistant to the heat, cold and many other common cattle problems.

4. AYRSHIRE COW:

4.1. The average mature Ayrshire cow weighs 1000-1300 pounds.

4.2. They are known for low somatic cell counts, ability to convert grass into milk
efficiently, and hardiness.
4.3. The breed's strong points are desired traits of easy calving and longevity.

5. GUERNSEY:

5.1. The milk of these cows is known for their rich quality.
5.2. The beta carotene present in Guernsey cows makes their milk slightly golden in
color.
5.3. Weight of an adult Guernsey cow is around 1000 pounds.
5.4. Farmers prefer this cow for qualities like high efficiency of milk production,
longevity, and lesser problems related to calving.
5.5. Guernsey's produce their high quality milk while consuming 20 to 30 percent
less feed per pound of milk produced than larger dairy breeds.

5.6. They are also known for having a lower projected calving interval and have a
 younger average age of first calf heifers than the larger breeds.
5.7. The productive life of Guernsey cows is lowest.