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Cash Cows: How to milk money from dairy farming

Kenya has one of the largest dairy industries in sub Saharan Africa with an estimated 3.8 million dairy cattle. Kenya is one of the few African countries that produce enough milk for domestic consumption with the occasional surplus for export. Dairy production in Kenya is mostly done on a small scale in Kenya with 80-85% of milk in Kenya is produced by small-scale farmers. Kenyans are also some of the highest consumers of milk on the continent. It is estimated at a per capita consumption of 145m litres per year.

Small-scale dairy production may not be necessarily profitable as there needs to be economies of scale. A farmer that is milking less than 6-7 cows at current prices of concentrates and milk prices will not be making a profit. Analysis of dairy enterprise gross margins shows this.

Profitable dairy production is not a walk in the park. Profitability in dairy farming depends on whether dairying is the main enterprise or if it is a sideline. This determines the intensity by which the enterprise is run. The profits in dairying are derived from sales of milk and of stock. Stock may be heifers or bulls/steers. The farmer may also sell cull cows either for breeding or beef.

To start and run a profitable dairy production farm a fanner will require the following:

  • Land
  • Labour
  • Market
  • Capital
  • Appropriate Cattle
  • Management skills
  • Farm planning
  • Animal health and welfare
  • Animal Breeding and genetics
  • Animal Nutrition
  • Labour Management
  • Mechanical/Technical

LAND

Land suitable for dairying is one of the major limiting factors. To do profit-able dairy farming one needs land on which to house the dairy cattle. It is possible to do this on a very small piece of land.

However it is always better to have a larger piece of land to allow for expansion. Land is also required to grow the fodder/roughage that is required by the cattle. The less feed that you buy as a dairy farmer, the better. However if the milk price is favourable (as it currently is in the urban and peri urban areas) then it is possible to buy most of the feeds and still make a profit. This scenario calls for very strategic long range planning.

LABOUR

Dairy farming requires good reliable labour. Dairying by its nature is a 365 day per year, all-weather job. It is impossible for the owner or manager to supervise all the operations all the time. Therefore, the labour must enjoy their work and want to do a good job. Critical tasks such as milking the cow (by hand or by machine) and heat spotting cannot be easily measured.

There is no way of knowing if until weeks later or months later if the inseminator is doing his job properly or if the stockman/herdsman is really looking out for cows in heat or whether the milker has milked gently and quietly while the owner/manager was absent, or whether the right cow was given the ration she was supposed to get. In a nutshell, a successful and happy dairy farmer has good labour relations. He/she enjoys working with farm labour and involves them in the enterprise as far as possible.

CAPITAL

Capital is required to run any business. In the case of dairying capital is required to set up as well as to run the enterprise. Amount of capital required depends on the intensity of operations. If it is the main enterprise then it is likely to require high investment in cattle, buildings and machinery.

If it is a sideline then it may only require capital to purchase the cattle. Some investors prefer to grade up while others prefer to start with high quality cattle. Some prefer to start with in calf heifers whereas others prefer to start off with a mixture of in calf heifers and cattle that have calved before. The amount of capital required will depend on the aspirations and goals of the investor.

There is also need for a substantial working capital for the purchase of inputs such as feeds (concentrates and forage) as well as to buy semen and acaricide.

CATTLE

The quality of cattle and where they are bought will dictate the amount of money spent. If the investing farmer sources cattle from renowned breeders, then the price tag will range from Ksh 90,000 to Ksh 250,000. There is a wide range of quality of cattle on the market. From cross-bred cattle to highly bred pedigree cattle. The higher the pedigree the more expensive the cattle tend to be. The farmer entering the business must plan carefully.

MARKET

Before going into dairy farming the farmer should carefully assess the market that is available for the milk he intends to produce. The market determines the price of milk and hence the profitability. Areas of low milk production potential
have higher demand and so the prices are higher.

However the cost of production .in the same areas is significantly higher. Some farmers have niche markets that pay them a premium for the milk. As a general rule good quality chilled milk will fetch a higher price than average quality un-chilled milk. Milk processors are always willing to talk with farmers that are producing bulk milk. Volumes in excess of 1000 litres per day attract the interest of the processors.

MANAGEMENT SKILLS

Management skills include Farm Planning, Animal Health and welfare, Animal breeding and genetics, Animal nutrition, Labour management and Mechanical/ Technical.

Farm Planning: A  well-planned farm with  the roads, buildings and fences that are properly sited is far easier to manage than is a badly planned farm. Fodder flow planning, which seeks to provide the right amounts of feeds in the right quantities at the right time of the year, and the least cost is a very important aspect of dairy farming. Part of fodder flow planning is the provision of a fodder bank to enable the farmer to get through the drought years without trouble. Farm planning and fodder flow planning are areas where expert assistance is essential and available in Kenya.

Animal Health and Welfare: Cows will not produce well, nor will young stock grow well, if they are not healthy and free from stress. Thus stockman-ship skills, which include veterinary knowledge, are essential. These skills can be taught, but experience is also very important. Much of this cannot be delegated, and expert assistance, in the form of visits by a veterinarian on a regular basis, has been shown to be a very good investment. The maintenance of the health and breeding success of the herd is seen as a partnership between the veterinarian and the farmer.

Animal Breeding and Genetics: The dairy farmer must breed animals that will milk well in his environment. The decision-making that is involved in breeding may be delegated to the AI service provider to an extent. The farmer need not become an expert on all the bulls that are sold by the various vendors of bull semen. However the farmer needs to be familiar enough to query bulls and to know what the trends are in the industry.

For instance the farmer should know about the availability of sexed semen and the price ranges. It is possible to call in an advisor to go through the herd and make recommendations. In addition if the farmer is a member of a breed society, he may learn a lot about breeding from the society.

Animal Nutrition: Cows will not milk well, nor will young stock grow satisfactorily, unless their nutritional needs are satisfied. Moreover, nearly 80% of the variable costs in dairying are associated with either feed purchases or feed production. Therefore the interaction between feeds, feed costs and production must be thoroughly understood.

Nutrition is such a technical field that nearly every farmer must find himself a good nutrition adviser, whom he can trust to give unbiased advice. The adviser may be a representative of a feed manufacturing company, because the good rep knows that it will be in his own long-term interest for his customers to make a profit.

However, correct and economical nutrition is so important that all dairy farmers should endeavor to be knowledgeable in this field. The actual calculations should be left to the adviser, but the farmer should be able to understand and evaluate the advice given. A word of caution is that the less complicated it is to formulate the diet the easier it is to implement. It is also very important that wastage is curbed, It has been observed that many well-formulated rations are wasted because of badly designed feed troughs.

Management   is   very   crucial   in   the practice  of dairy  farming.  Because  of the diversity of skills required, dairying perhaps puts more demand on management than does any other farming enterprise.

Dairying may be conducted as a sideline to some other main enterprise(s) or a single enterprise by the specialist dairy farmer who has no other main enterprise. When conducted as a sideline, it may provide a regular, monthly cash flow on a farm where the main line(s) provide a very seasonal income (e.g. growing maize) or to make use of resources on the farm that would otherwise not be used. The true costs of sideline dairying are seldom correctly calculated because they are hidden by the large costs associated with the main enterprise.

If the real return to capital was calculated, the cost of the regular cash flow might be found to be far higher than the cost of borrowing money to cover the low-income months. Proper budgeting and cash flow planning will show whether this is the case. The low management input, low milk production milk production approach is only profitable if it uses resources, which could other-wise not be used for profitable alternatives. Sideline profitability is most likely if the only investment required is in cows; pasture establishment and minor modification of an existing building. Even though this is a low input system, some management is required.

If the dairy enterprise makes significant demands on resources of land, capital, labour and management, then the low input system is no longer viable because a higher return per shilling invested will be essential in order to cover the cost of both capital and management.

It is necessary to understand clearly the distinction between profit per litre and profit per cow. At the sideline level, margin per litre may be the appropriate measure of profitability because the only significant capital investment may be in the livestock.

Once the capital tied up in land, buildings and machinery has to be included in the calculations, as well as management costs, then return per cow (which is akin to return per shilling) becomes important. Returns per litre may be much lower, but the increased litres per cow and per hectare should mean an increased return to capital and management.

Whatever the level of production per cow or per hectare aimed at, this must be a deliberate decision based on making the best use of the limiting resource(s). The limiting resource in dairying often is management. The trap into which the unwary may fall is to try and emulate all the things that top farmers do, and then do all these things badly, instead of mastering just a few aspects, and doing the rest on a simple routine basis, until management time is available to go into these aspectsin more detail.

The aim should be to do the more important aspects well, to delegate those tasks that can be profitably delegated, and to accept rational if less intensive, approaches to the rest. To illustrate, best use can be made of concentrates by allocating supplements to individual cows, according to their nutrient requirements, by using a sophisticated computer system. Unfortunately, many farmers who attempt to implement such systems would be better advised to concentrate their limited management efforts into the production of better quality and more abundant roughages.

This is a fundamental problem, and until it is solved, no computer system will make a great deal of difference to either the production or the profitability of the enterprise.

Replacement Heifers: The cost and quality of replacement heifers. If not well grown they will not produce well. Many small-scale farmers do not raise heifers optimally and so the heifers are not able to produce milk optimally. The large-scale farmers who have traditionally provided these replacement heifers for small scale farmers have also been dispersing gradually over the last decade.

Cattle Feed Challenges: Feed constitutes between 60 and 80% of the cost of milk production. This means that the dairy farmer must pay particular attention to the cost feeding. Currently the cost of concentrates is very high. This is because dairy farmers in Kenya have traditionally relied on crop by products that come from neighbouring countries particularly Uganda and Tanzania and the demand for these products have gone up within the countries of production and for export to other parts of the region/continent.

The solution that is open to dairy farmers is to grow and use better/cheaper sources of feed that preclude the need for high quantities of concentrates. If produced optimally and harvested at the right time good quality forage/roughage will go a long way to reduce the amount of concentrate needed to produce high volumes of milk. A good example is the used of good quality maize silage and lucerne. The quality of grasshay on the Kenyan market is suboptimal. A gap exists for the production and marketing of quality forage in Kenya.

The processors should work with each other more closely and very closely with the farmers. Long-term contracts that are honoured by both parties would go a long way in leveling out the troughs in production. If farmers were paid a premium for milk delivered in the dry season, they would plan to produce more during that period. Prompt payments by the processors would also incentivise the farmers.

The farmers must trust processors and vice versa. Milk gluts have always happened and may well continue to happen. What is important is that the farmer should plan properly for them. When it is cheaper to produce the milk the farmer should be prepared to sell the milk cheaper and when there is scarcity, then the processor should be prepared to buy the raw milk a little more expensively.

When there is a glut then the excess milk can be dried and stored. This ensures a longer shelf life and also saves on volume required for storage. In the time of milk scarcity, the milk is then reconstituted and packaged for sale. During the time of glut, the processors should buy the entire surplus, dry and store milk as powder.

It is in this respect that the processors should cooperate with each other. Instead of each of them investing in milk drying and storage capacity. They should join forces and dry milk in a concerted manner in a central location. Unfortunately this is easier said than done.

By Nelson Ojango

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Know Your Breeds

Guernsey:

Breed Colour: Dark brown

Breed Traits: Medium sized animal, a low feeder .

Average L. Weight is 600 Kg.

Ideal dairy bred.

Adaptable to warm climate and an excellent grazer.

It is the best breed for pasture -based milk production.
Milk: High butter fat content, Has a rich golden colour and very high beta carotene levels. Has the highest percentage of A2 milk.

Friesian

Breed Colour: Black and white

Breed Traits: Have large bodies and thus very heady feeders. Friesians produce good meat as well as milk. They require good management for good results.

Milk: High milk producers, low butter fat milk content

Sahiwal

Breed Colour: Reddish brown almost red with a bit of white on the neck and the underline

Milk: Heaviest milker of all Zebu breeds

Calves much easily

Breed: This is a Zebu breed used mainly for dairy production. The males have a big hump and are very strong tall animals.

Are tick- resistant and heat- tolerant. Can live for up to 20 years.

Jersey:

Originally from Channel Island of Jersey.

The bulls weigh between 540 -   820 Kg.

Due to their adaptability to hot climates,  they are bred in the  hottest parts of Brazil.

Breed colour: Light brown to almost black.

Breed: Small size dairy breed.

Ideal for first-time farmers

An economic breed to produce.

Adaptable to hot climates, (very common around the coastal region) and the calves require more attentive management in cold weather due to post parturient hypocalcaemia (milk fever).

Milk: High butter fat content 6% High protein content 4%

Simmental

Originally from Switzerland.

Breed Colour: Has a white face and a combination of red and white spots or pale golden colour and white

Breed: A fast maturing breed.

Highest combined weaning gain and milk yield than any other breed

Are heavy feeders.

Ayrshire

Originally from Scotland.

Animals weigh between 450- 600 Kg.

Breed Colour: Are reddish to dark brown breed.

Breed: Very hardy breed Medium sized animals. Ideal commercial dairy cattle.

Are strong and easy to raise

Often crossed with Holstein cattle to improve the hardiness and fertility of Holstein

Milk: Milk has moderate butter fat content and relatively high protein levels.

Have ability to convert grass into milk more efficiently

By Karimi Wamache

  • Tash

    hi thank you for such an informative piece am a new small scale dairy farmer i have 3 cows but the level of production has really gone down i haven’t really gotten my feeding figured out well. please help with information on silage making.

  • james

    hae thanx for interactive information was asking which breed is most ideal for a place like bondo in nyanza province

  • willy

    i read an article of a farmer in Kiambu who feeds his dairy cows twice a day.How should dairy cows fed?

  • Brenda Limo

    Thank you soo much for the infor. bought two acres of land in kiserian and want to start the dairy farming project.which breed can istart with. i have a small capital of 500k. Brenda Limo. Nairobi. Pliz help out.

  • Nafhtari

    Hi,what are the benefits of a jersey cow over a holstein-friesian?Would you advice a poor-resource farmer to keep;A Jersey..why?…or a holstein-friesian…why?

  • http://www.facebook.com/kipkurui.tania Kipkurui Tanui

    Nice article, I hope many youth will consider animal husbandry as a source of employment

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