Agriculture is the backbone of the Nepalese national economy. The contribution of the agriculture sector to national GDP is 27.1% , while the contribution of the livestock sector to agricultural GDP (AGDP) is around 28%. Livestock is an integral and important component of the mixed farming system in Nepal. The sector not only contributes to the national GDP but also ensures the flow of money from urban to rural Nepal. The dairy sector not only provides household nutrition but also ensures the flow of money (Rs 60 million daily) from urban to rural Nepal . Organized dairy development activities in Nepal began in 1952 with the establishment of a Yak cheese factory in Langtang of Rasuwa district under Food and Agriculture Organization (FAO) assistance in 1953. In 1954, a Dairy Development Section was established under the Department of Agriculture (DoA) and also a small-scale milk processing plant was started in Tusal, a village inthe Kavre district. In 1955, a Dairy Development Commission was formed. The First Five Year Plan (1956-61) stressed the need to develop a modern dairy industry. Accordingly, in 1956, a Central Dairy Plant, with an average milk processing capacity of 500 litres/hour was established in Lainchaur, with financial assistance from New Zealand and technical assistance from FAO. Around the same time, a second mini milk processing plant was established at Kharipati, in the Bhaktapur district. The plant started processing milk and marketing activities in 1958. In the process, before 1960, two additional cheese factories were established under the DoA in the other two alpine districts of the country. In 1960, a Cheese Production and Supply Scheme was also established. The Dairy Development Commission was converted to the Dairy Development Board in 1962. To meet the growing demand for milk in Kathmandu, the Board was converted to Dairy Development Corporation (DDC) in 1969 .Dairy is the most important sub-sector in the livestock sector contributing 9% of the GDP and 63% of livestock gross domestic product (LGDP) and 9% of AGDP . There are more than 500,000 dairy farmers and 1700 dairy cooperatives involved in the dairy sector in the country, generating employment and income in rural Nepal. The investment in the dairy sector is about Rs 30,000 million and the sub-sector provides direct employment to 20 thousand persons .This sector holds billions of investments and also generates the same level of employment. The sustainability and the competitiveness of the entire sector solely depend on the efficiency of milk production, demand and supply and price policy. Half of the total milk produced is self-consumed and/or retained by the producer farmers and the rest is traded at formal and informal sectors in the dairy industry, milk collection centres, milk cooperatives, sweetshops, local markets, neighbours, hotels and restaurants. Dairying is recognized as a prestigious occupation among the other agricultural sub-sectors and is contributin

1. Report on
Study on the production cost, gaps and challenges
on marketing of milk & goat meat in Bagamati
Province
Submitted by
Innovative Vision Pvt. Ltd.
Samakushi, Ranibari, Kathmandu
Submitted to
Provincial Dairy Development Board
Hetauda, Makwanpur

2. Introduction
• Milk production in Nepal: Traditional production
system, in the mixed farming system, with small
non-commercial holdings.
• Dairying is s a prestigious occupation among the
other agricultural sub-sectors.
• More than 500,000 dairy farmers and 1700 dairy
cooperatives.
• Only 17% of total production passes through the
public and private sector dairy processing plants.

3. • One study in India showed that a dairy farm with
nine lactating animals in India has similar labor
costs (per litre of milk) to those of a farm with
350 lactating animals in the United States of
America.
• The share of buffalo & cow milk is 60% & 40%
respectively, in Nepal.
• 69 % of the price goes to the farmers & 31 % to
the processors
Introduction…..

4. Rationale
• There aren't many success stories in commercial dairy
farming in Nepal. This is primarily due to the high cost
of milk production, which lowers the expected rewards
for farmers.
• Farmers often complain that most of the price they get
from the sale of milk is ploughed back into purchasing
feed for their livestock
• The price the farmers receive for their milk is their most
immediate concern, yet little seems to be known about
the calculations and factors that go into determining
farm-gate prices

5. OBJECTIVES
1. Broad objective
• To assess the milk production cost and recommend an
appropriate price for raw milk to be purchased by the
processors
2. Specific objectives
• To assess the fixed cost and variable costs of a dairy farm at
different production levels and different production
systems.
• To estimate per unit milk production cost of different types
of farms and recommend appropriate selling price.
• To estimate the cost of production of goat meat in the
province.

6. Review of Literature
Total national production of milk in FY 2020/21 A.D:
2,479,899 MT
1,419,412 MT (57.24%): buffalo milk & 1,060,487 MT
(42.76%): cow milk.
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
Total
Milk
Production
(Mt)
Total Milk
Production
COW MILK
BUFF. MILK

7. Bagmati Provincial Production Trend
FY 2074/75
(2017/18)
2075/76
(2018/19)
2076/77
(2019/20)
Total milk
production in
MT
391,042 397,974 386,370
• The total production of milk in FY 2019/20, 2018/19 and
2017/18 were 3, 86,370 MT , 3,97,974 MT & 3,91,042
MT respectively.
• The trend shows declined production from past fiscal
years.

8. National Trend of cost of production
of milk
Year Cost of Production/Litre (NPRs)
2077/78 56.32
2076/77 56
2074/75 48.55
• The trend in the cost of milk production per litre of
milk showed an increase in cost.
• The latest cost of production in Nepal was NPRs
56.32 per litre in the fiscal year 2077/78

9. Method and Methodology
Study Sites
SN Districts Farmers KII Cooperatives Total
1 Bhaktapur 30 2 2 34
2 Chitwan 80 4 5 89
3 Dhading 20 2 2 24
4 Dolakha 10 2 2 14
5 Kathmandu 15 2 2 19
6 Kavre 70 4 5 79
7 Lalitpur 50 3 3 56
8 Makawanpur 40 2 3 45
9 Nuwakot 10 1 1 12
10 Ramechhap 10 1 1 12
11 Rasuwa 10 1 1 12
12 Sindhuli 10 1 1 12
13 Sindhupalchowk 15 1 1 17
Total 370 26 29 425

10. Data types and Analysis
 Primary data : Collected through KII, and household survey
 Secondary data: Collected from reports, newsletters, bulletins and
relevant articles, MOALD, NDDB
 Analysis by using SPSS (Version 20), Stata MP 13 and MS Excel to
analyze and present data
Sample and Sampling
Technique
 Household survey (using
personal interview
schedule with 370 milk
producers) selected from
seven provinces by
Stratified Random
Sampling
EpiCollect App Used
for Data Collection

11. Economic analysis Statistical analysis
Total Cost of production
Total Cost
Total Cost per animal per
month
Shed cost per animal per
month
Animal cost per day
Total Fixed Cost + Total Variable cost
Total cost per month/ (Number of animal)
Depreciated price/ (Total no of animal *12)
Depreciation rate : 2.5-5%
Depreciated value of animal / (estimated useful life
*12)
Depreciation rate : 10%
Salvage value : Rs. 37,500 for buffaloes
(Estimated useful life was 10 years for animals)
Data Analysis Schemes

12. Economic
analysis
Statistical analysis
Cost of milk
production
Total cost / ΣMP
Where,
Totalcost = Total Variable Cost + Total Fixed Cost
ΣMP is the sum of milk production
Cost of milk
production per
liter
Total cost / TM
Total cost = Total cost in a parturition interval
(lactation + dry period)
Tm= Total milk yield in a lactation period
Average monthly
milk yield
(Total yield /PI), where
Total yield = Total milk yield in a lactation period
PI = Parturition interval in months

13. Economic analysis Statistical analysis
Monthly income from milk Average monthly milk yield * Average milk
price
Average Monthly Net
Income
Monthly Gross Income - Monthly Gross Cost
Small Scale Dairy Farm A dairy farm with 5-10 high-yielding improved
breeds of milking cows or 2-4 high yielding
improved breeds of milking buffaloes.
Medium Scale Dairy Farm A dairy farm with 11-30 high-yielding improved
breeds of milking cows or 5-12 high yielding
improved breeds of milking buffaloes.
Large Scale Dairy Farm A dairy farm with more than 30 high-yielding
improved breeds of milking cows or more than
12 high-yielding improved breeds of milking
buffaloes

14. Sampling Sites

15. Types of Farms
Both
are
almost
equal
27%
Buffalo
22%
Cattle
51%

16. Table : Overall total cost of livestock producers (NPRs)
Province Total Fixed
Cost
Total Variable
Cost
Total cost
Bagmati 851.7±72.6 7040±449.2 7891.78±480.3

17. Cost of production (NRs) per animal per
month
Particulars
Scale of Operation
Small Medium Large Overall
Variable Cost (A) 6403.62±429.2 9249.32±444.54 11201.4±395.19
7040±449.213
(89.20%)
Fixed Cost (B) 769.26±75.4 1133.85±49.336 1416.44±54.67
851.7±72.643
(10.79%)
Total Cost (A+B) 71910.86±457 10383.17±469.2 12617.88±439.1
7891.78±480.32
(100%)

18. Cost of Production & Farm types
Particulars
Farm Type
Cattle Only (50.4%) Buffalo Only (24.8%) Mixed (24.6%) Overall (100%)
Variable Cost (A) 6125.5±430.2 8434.66±471.27 8154.1±422
7040±449.213
(89.20%)
Fixed Cost (B) 673.4±63.3 1211.5±96.7 1058.67±49.95
851.7±72.643
(10.79%)
Total Cost (A+B) 6798.9±459.91 9646.18±494.98 9212.77±443.4
7891.78±480.32
(100%)

19. Net Income
Particulars
Scale
Small Medium Large Overall
Milk yield per day 6.56±0.32 7±0.25 7.3±0.35 6.61±0.314
Milk yield per
month
197±9.7 212.45±7.593 219.16±10.489 200.39±9.426
Income from milk 15422.77±798 18163.12±662 20030.357±849
16035.31±785
(95.42%)
Other income 827.41±150 489.59±64 865.22±79
768.9±138
(4.57%)
Gross income 16250.18±829 18652.71±672 20895.58±872
16804.2±812
(100%)
Net income (gross
income-gross cost)
8478.79±1015 7983.16±806 4002.38±1815 8265.8±1012

20. Cost of production & returns
Particulars Scale
Cost incurred in Small Medium Large Overall
Production cost
(NRs/ltr)
46.189±5 56.46±5 65.9±4 48.5±5
Gross price
received for milk
sold per ltr
79±15 87.7±13 92.14±9 80.87±15
Margin per ltr milk 32.79±5 30.23±5 26.2±4 32.1±5

21. Channel of sale, price of milk & scale
of operation
Scale Channel 1 Channel 2 Channel 3 Channel 4 Average
Small 83.41±18 68.78±17 82.25±17 83±23 79±15
Medium 95.83±13 77.84±11 93.45±16 87.38±14 87.7±13
Large 108±11 NA NA NA 92.14±9
Overall 87.23±18 70.25±17 84.12±17 83.74±21 80.87±15
Channel 1: Producer to Buyer
Channel 2: Producer to Cooperative
Channel 3: Cooperative to Buyer
Channel 4: Cooperative to Dairy

22. Economic Analysis
• IRR (21.93%) greater than opportunity cost of
capital i.e. market interest rate which is generally
14%.
The net cash flow is calculated as a difference between cash inflow
and cash outflow occurred in 2022, taking a time of project as 10
years. Number of animals is 4 (2 cows + 2 buffaloes)
Break Even Point For Result Remarks
Milk Price Rs. 40.58 At the result price firm’s revenues
and expenses are equal.
Milk Yield (per month) 385.63 ltr. At the result yield firm’s revenues
and expenses are equal.

23. • Economic analysis shows the dairy farming to
be viable.
• Half of the respondents were cattle farmers,
among the remaining half, there was an equal
number of buffalo & mixed farmers.
• In cattle-only farms, the average number of
milking animals was 3.
• The average number of Jersey cows was 3, &
that of HF & local cows was 2.
CONCLUSION

24. • In buffaloes only farms, the average
number of milking animals was 2.
• Among the buffaloes, the average
number of Murrah breed was 2, that
of local & the crossbreds was 1 per
household.
CONCLUSION……….

25. • The average total cost of livestock producers
was NPRs 7891.78±480.32 per adult animal
per month.
• Most important cost items were
feed/nutritional costs (67.81%), animal costs
(5.6%), medicine (4.7%) and vitamin &
calcium (3.38%) of the total costs.
• The average milk yield per day per milk
animal was 6.56±0.32, 7±0.25 and 7.3±0.35
liters for the small, medium & large scale of
operation.

26. • Cost of production per litre milk per milk animal
was NPRs 46.189±4.246, 56.46±4.25, and
65.9±3.71 for the small, medium & large scale
farms.
• The average price received by the farmer per litre
of milk was NPRs 79±14.88, 87.7±12.3, and
92.14±8.15 for the small, medium & large-scale
dairy farms.
• The average margin per litre of milk was NPRs
32.79±4.278, 30.23±4.196, and 26.2±3.66 for the
small, medium & large-scale dairy farms.

27. Recommendations
• Selection of preset farms for estimation of
cost of production, annually.
• Assess the consumer’s grievances &
expectations of the quality of milk.
• Encourage vertical integration of the dairy
farmers with other players of the value chain.
• Work towards the pricing based on Energy
Corrected Milk (ECM) rather than SNF & Fat.

28. Pictorial glimpses of data collection

30. Production Cost of Goat Meat
• Survey done in 4 districts: Chitwan, Ramechhap,
Sindhuli & Dhading.
• 20 goat farmers were sampled in each district.
• Choice of the farmers was based on
acquaintances & contacts.
• Data collected using electronic formats.
• Data collected were related to the variable cost,
fixed costs & the incomes form the farm.
• Economic assumptions were similar to that of
milk production.

31. Results
On the surveyed (n=80) household basis
• Average number of animals: 17
• Average number of dams: 8
• Average number of kids/hoggets: 5
• Average number of goats (>6 mths of
age, saleable in the market): 4

32. Calculations
Average monthly cost of production for a farm with
average animal count shown above:
• Total Variables cost = ∑Monthly cost of all
variable components
• Total Fixed cost =∑ Depreciated amount of all
variable cost / expected life span
• For animals; expected life span = 5 years
• For machineries; expected life span = 10 years

33. Total cost per month (NPRs)
Particulars Overall (n=80)
Total Variable Cost (A) 12222.19±258.93
Total Fixed Cost (B) 5633.4±1200
Total Cost (A+B) 17855.6±1868.41

34. Average monthly income
Income from animal sale 39880.95 ± 9480.5
Income from manure 4120.83 ± 1685.4
Income from forage, saplings etc 141.66 ± 336.144
Other income 283.3 ± 90.3
Gross income 44426.78 ± 9602.7
Net income 26571.18

35. Cost of Production
Avg wt of saleable goat (kg) 23.48 ± 8.91
Expected price (NPRs) 847.2 ± 212.7

36. Conclusion
• For a profitable goat farming business, according
to the farmers data the current cost of per kg
live goat must be increased.
• Attaining more than 25 kgs in about year will
bring this cost lower than NPRs 847.
• The feed cost must be minimized for a profitable
goat farming business.
• Forage based goat farming could be useful for
decreasing the cost of production.

37. Thank You Very Much