The Economics of a Small Dairy Farmer

Keeping a milk animal can provide steady income, but profit depends on careful management of costs and yields.

The main costs

• Feed and fodder: usually the biggest cost, often 60 to 70 percent of total costs. This includes green fodder, dry fodder like straw, and concentrate feed.
• Labour: often family labour, especially women’s, which is unpaid but has an opportunity cost.
• Veterinary care, vaccines and artificial insemination.
• Shelter, water and electricity.
• The animal itself: buying a good cow or buffalo can cost tens of thousands of rupees, often financed by loans.

Revenue

• Milk sales, priced by fat and solids-not-fat content, especially for buffalo milk.
• Calves.
• Dung, used as manure or fuel.

Yield matters

A crossbred cow might produce much more milk per day than an indigenous cow, though indigenous breeds are hardier and need less feed. Average yields in India are lower than in major dairy countries, which limits incomes.

The dry period

Animals don’t produce milk all year. After calving, they produce milk for several months, then have a dry period. A farmer must feed the animal even when it produces nothing, which is why breeding management matters.

Rough economics

For many small farmers, a single animal produces a modest monthly profit once feed costs are paid. Profits rise when:

• Yields are higher.
• Feed is grown at home or bought cheaply.
• Animals stay healthy.
• Milk is sold to a cooperative or dairy at fair prices.

Rising feed costs

When fodder prices rise, such as after droughts, farmers’ margins shrink. Some sell animals, which can lower future milk supply and push up milk prices.