Business plan for a setting up a small scale dairy farm

Abstract

The demand for dairy products has seen a perennial growth in India. This applies all the way from the unprocessed milk to most of the milk products/ by products. Operation Flood , though it had made its initial mark in India, was not able to meet the demands of the ever growing Indian population. The disposable income of an average Indian has increase multifold. The improvement in the quality of living has prompted the masses to focus on health and milk has been the priority food in meeting their health demands. Given the economic growth and population growth in the country, market reports say that the demand for milk is expected to grow at a very good rate, year on year. Due to the increasing demand by the cooperatives as well as private producers, the market is constantly available for liquid milk. The Nilgiri district cooperative has a installed capacity of 45,000LPD (liters per day), only 30,000LPD is been fulfilledcurrently1. Due to increased local demand, milk from the surrounding cities such as Erode and Coimbatore are transported to the Nilgiris and are sold at a premium. Hence significant opportunity exists to fulfill the remaining demand of 12000-15000LPD.The advantage of locating the dairy farm in the Nilgiris is multifold. There are many private owners who are ready to sell their cows and hence access to cattle is easier. The weather is cool through out the year (with and average temperature of 15 degrees C) and hence is ideal for cattle which require an average temperature of 18-20 degrees C. The market available is quite small for a new milk producer to setup a large scale farm, which is typically very expensive; hence unfulfilled demand is expected to exist well into the future. Green grass, being the primary ingredient for milk production is naturally available and can be easily grown in the Nilgiri hills. Traditionally the dairy cooperatives have been supplied by farmers who have typically 1or 2 cows and share the excess milk with the cooperative. For large organized players, the investment involved is significant and are limited in number.2 The investment is usually high in these cases due to expensive equipment used for mechanization. The middle ground (small scale) is not attempted by many due to the shortage of labor for sufficient maintenance and the lack of glamour in dairy industry. With the development of home grown tools for partial automation, the small scale segment looks very attractive. For a small scale dairy farmer marketing expenses are literally zero. Since the milk is supplied to the cooperatives, the cooperative performs the distribution and marketing function. The prices are also determined by the cooperative keeping the profits of the producer in mind. Further, the need for skilled labor is relatively low and output can be achieved with semiskilled and unskilled labor itself. Hence there is reduced spending when it comes to recruitment and training. The advantage of keeping the farm size small is that, there is consistent revenue, ease of maintenance, partial mechanization is feasible and many options are available for setting up a self sustaining model. For example, sufficient quantity of the primary feed (dry grass/green grass) can be produced in-house to meet the immediate demand. Hence for all the above reasons, a small scale dairy farm business looks very attractive.