Introduction

Being major player in national economy livestock sector has been selected as an economy engine
for poverty alleviation from Pakistan. The paper titled, Revival of Dairy Sector for Economic
Development mentions the contribution of the agriculture amounting to one-fifth to the country’s
gross domestic product (GDP) and livestock sector employs more than 40 per cent of the rural
workforce.
Livestock is the largest shareholder in agriculture, with a contribution of 58.3pc in the sector’s
GDP. The livestock sector is dominated by mostly smallholders and landless peasants, are
directly involved in livestock farming and around 8.5 million families depend upon livestock
raising for livelihood.
Pakistan is the third-largest milk producer in the world, with annual production of over 50 billion
litres. Therefore, milk is by far the only product of the livestock sector that alone exceeds the
combined value of all major cash crops in the country.
In Pakistan livestock includes cattle, buffalo, sheep, goat, camels, horses, asses and mules. Milk,
meat, wool, hair, bones, fat, blood eggs, hides and skins are the main livestock products among
which milk and meat are taken as major products. Besides this, these animals are used for
draught purposes.
As per IFCN Dairy Map/Report 2012, Pakistan is 3rd largest milk producing country in the
world. Milk is produced by buffalo, cattle, sheep, goat and camel but being major contributor in
milk production, cattle and buffalo are considered as major dairy animals and are always mainly
focused and discussed. These dairy animals are also used as draught and beef animals. When a
dairy animal has spent her productive life and becomes uneconomical for milk production then
she is used as a beef animal. Male calves of dairy animals and dairy bulls when no further
required for breeding purposes are also utilized for beef purposes.
 US
Others 25%
29%

India
EU 19%
21%
Pakistan
6%
Buffalos found in Pakistan make up 47% of Pakistan's major dairy animal's population providing
more than about 80% of the total milk produced in the country. Milk is favorite food in Pakistan
and is consumed as fresh, boiled, powdered and in processed form as yogurt, ghee, lassi, butter,
cheese, ice cream, sweets and in other confectioneries.
Pakistan Dairy industry is one of the most essential sectors in the country GDP contributions and
it is the spine of Pakistan economy. Capital structure is very important for the firm particularly
Dairy Industry sector. Because it has an impact on long term corporate profits, firm's valuation
and capital budgeting decisions.
In many respects the dairy industry occupies a special position among the other sectors of
agriculture. Milk is produced every day and gives a regular income to the numerous small
producers. Milk production is highly labor-intensive and provides a lot of employment.
The dairy industry is the sector with the highest degree of protection due to the economically
vulnerable position of small milk producers. Milk - also known as white gold - can be used to
make an enormous variety of high quality products. The high cost of milk as a raw material has
necessitated a high-tech processing industry. The special nature of milk (perishable and bulky)
leads to the necessity of strict and comprehensive quality regulation and to high transport costs.
The large dependence of milk producers on the dairy processing industry has resulted in a strong
position held by the co-operatives in milk marketing and in the processing industry.
The livestock sector plays a vital role in the economies of many developing countries. It provides
food or more specifically animal protein in human diets, income, employment and possibly
foreign exchange. For low-income producers, livestock also serves as a store of wealth; provide
draught power, and organic fertilizer for crop production as well as means of transport. Milk
provides relatively quick returns for small-scale livestock keepers. It is a balanced nutritious food
and is a key element in household food security. Smallholders produce the vast majority of milk
in developing countries where demand is expected to increase by 25% by 2025. Dairy imports to
developing countries have increased in value by 43% between 1998 and 2001. Informal market
traders handle over 80% of milk consumed in developing countries. Two thirds of total world
milk is produced by Brazil. India. Pakistan. Poland. Russian Federation. USA. and 15 EU
member states. Developing countries produced are third of total world milk production in 2000
(216 million metric tones) and it is increasing. Various animals including buffalos. cows, sheep
and goats produce milk. Total world milk production is dominated by cow's milk followed by
buffalo, goat and sheep.
There is a dearth of research and documentation regarding the dairy sector in Pakistan. No
serious effort has been made to understand dynamics of this important sector. Its importance
could be judged from the fact that in terms of market value, its contribution to Gross Domestic
Product (GDP) surpasses all the major crops. Pakistan is the third largest milk producer in the
world About a third of the total milk produced by the rural families flows out to urban consumers
and processing industries. In urban areas milk is available to common consumers in two ways:
loose / unprocessed milk and packed/ processed milk.
Historical Background:
Till late eighties, more than 60% of buffaloes and some cows were maintained under the system
of Rural Subsistence Production System. In this system on an average there were 3 to 4 dairy
animals with one or two adult females. Almost 50 to 60% of the feed requirements of these
animals were fulfilled from grazing along with wheat straw and some green fodder. ¼th of milk
produced was sold out and remaining was utilized for domestic use. This system still exists in
some areas of Pakistan.
With the time being Rural Subsistence Production System changed into Rural Market-Oriented
Smallholder Production System. Under this system, on an average there were 5 to 7 animals per
herd, inclusive of cow; 3 to 4 adult lactating animals, one or two heifers, and one or two male
calves, but most often no bull. Feeding requirement of lactating animals was fulfilled from
fodder along with wheat straw and seed cake. More than 70% of milk produced was sold either
directly or through middlemen. This system was practiced by those smallholders who have
access to nearby livestock markets.
In 1980s, dairy sector in Pakistan moved towards commercial side and development of rural
commercial dairy farms started. A typical rural dairy farm running on commercial basis
consisted of about 30 animals of which 70% were females, including some cows. Approximately
40% of these adult females were in milk during most of the year. Fodder crops provided 50%
and straws about 35% of the feed requirements and concentrates made the rest of it. More than
90% of the milk produced at the farm was sold.
With growing demand for milk in urban areas rural commercial dairy farming moved toward
peri-urban areas. In peri-urban areas there are large and small dairy herds consisting of 20-50
animals with nearly 90% of adult females in production. Male calves are disposed off within first
two weeks of birth. These animals are fed chopped green fodder and wheat straw and concentrate
mixture with target to sell almost total milk produced.
Due to enhanced rate of urbanization over the last 2 to 3 decades, large peri-urban commercial
dairy farming is going towards urban commercial farming. Targets of these farms are to get
maximum milk production with economical and quality feeding and good management. Animals
on these farms are fed good quality green fodder or silage along with concentrate mixture. Dairy
animals maintained at these farms are considered elite animals; hence their yields per lactation
are considerably higher than those of animals maintained under other production systems. Milk
produced on these farms is either sold out in processed/fresh form through outlets or
departmental stores or supplied to dairy companies.
During last ten years major changes has been occurred in dairy sector of Pakistan and due to
these change this sector is on the way to become an industry. A large number of modern dairy
farms have been established in different areas. Most of these dairy farms have exotic animals and
number of these animals is in hundreds and even in thousands. Dairy farms with more than 3000
animals also exist and with 5000 animals are in plan. Such farms have adopted most modern
management and feeding practices and well trained man power. Milk produced on these farms is
either sold out in processed/fresh form through outlets or departmental stores etc. or supplied to
dairy companies.

Significance of Dairy Industry

The dairy industry has a number of specific features which distinguish it from the other sectors
of agriculture in a number of respects. The dairy industry is a special case in world agriculture.
The specifics of the dairy industry are due to four, partly interrelated, factors. The first factor is
to be found in the specific properties of milk as a raw material. Milk is basically a liquid
consisting of 90 per cent water, which means that it is a bulky and heavy commodity; also, milk
is produced on a daily basis. As a consequence, milk requires high-cost transportation and there
is a cost limit on the range over which it can be sold. Furthermore, milk will only keep for a few
days, which places a time limit on the period during which it must be used or processed and
transformed into a more stable, longer keeping form. On top of that, milk is highly perishable
and also potentially subject to adulteration, whilst the quality of the raw material is highly
dependent on farm management. Strict and comprehensive quality regulations are therefore
customary and necessary, and they are much more far-reaching and comprehensive than in other
agricultural sectors.
The second factor distinguishing the dairy industry within agriculture as a whole is the socio-
economic position of dairy farmers. The vast majority of them are small-scale producers, with a
weak and vulnerable position on the market; the nature of the business (involving a high
percentage of fixed costs) means that they are only able to adjust to market changes in a limited
and gradual way. Furthermore milk is produced every day and is a regular source of income to
the numerous small producers. At the same time, milk production is a highly labor-intensive
production and therefore provides many employment opportunities, not only in the dairy farming
business itself but also in the transport and processing of milk and in the agricultural supplies
sector. For that reason, in many countries the dairy industry is considered to be highly important
for the livability of rural areas.

The third factor highlighting the special position of the dairy industry is the strong position held
by the co-operatives in milk processing. The background to the strong position of co-operatives
in the dairy industry can be explained by, on the one hand the strong dependence of small
producers on the milk price and on the other hand by their weak position on the market. They are
able to keep the milk for at most a few days and unlike grain producers for example, they are
unable to defer selling their product until a more favourable moment on the grain exchange. As
long ago as the 19th century, this led dairy farmers to want a direct influence on the processing
industry, on which their livelihood was, and still is, so crucially dependent. The small family
farm with such a vulnerable and difficult product as milk to market needs and assured outlet and
a guarantee of a known price.
The fourth and final factor involved in the specific structure of the dairy industry is the fact that
milk is a very valuable but at the same times an extremely expensive raw material. On the one
hand, milk can be used to make a wide range of products which combine the features of being
highly palatable, nutritious and at the same time high-quality. Indeed, milk is also known as
`white gold'. On the other hand, its high cost price includes the necessity of using milk to make
products which have a high added value. The result is that the processing industry is very
important to the dairy farming sector, far more important than in many other sectors of
agriculture. In the dairy industry, the processing operations have to satisfy high technical and
quality standards.
Over the years, the four above-mentioned factors have helped to form the very special position
which, as stated above, the dairy industry today occupies among all the other sectors of
agriculture. However, the great changes which are affecting the world as a whole are likewise
leaving their mark on the dairy industry. The forces generated by these changes, such as the fast
pace of technological progress, economic liberalization, privatization, scale enlargement,
internationalization and globalization, are also exercising a growing influence on the dairy
industry.
A whirlwind of change is passing through the world, and it cannot fail to have an impact on the
dairy industry. For that reason, the lines which originated in the past cannot simply be
extrapolated directly into the future; the nature of the dairy industry is undoubtedly heading for
changes in the years ahead.

Pakistan’s milk sector and major dairy production systems

With a population of 160.9 million people in mid-2008, Pakistan is the sixth most populous
country in the world, with an estimated population growth rate of more than 3.5 percent per
annum (Government of Pakistan, 2017). In spite of its declining share in gross domestic product
(GDP), agriculture is still the single largest sector, contributing 21 percent of GDP and
employing 44 percent of the workforce. Despite a shift in employment in major sectors of the
economy, agriculture also remains the dominant source of employment (Government of
Pakistan, 2016). The livestock subsector accounts for 52 percent of agricultural and 11 percent of
total GDP, and affects the livelihoods of 30 to 35 million people in rural areas (Government of
Pakistan, 2016).

Milk’s contribution to the livestock sector

The dairy sector in Pakistan plays a significant role in the national economy and its value is more
than that of the wheat and cotton sectors combined (FAO, 2006a). Estimated annual milk
production in 2007/2008 was approximately 42.17 million tons, making Pakistan one of the
world’s top milk producers (FAOSTAT, 2010). Some 95 percent of all milk is produced from
small-scale rural and peri-urban holdings with two to three milking animals (Social Sciences
Institute NARC, 2003). It directly contributes to more than 11% of GDP of Pakistan.

Annual milk production

Buffaloes and cows are the major milk producing animals, with 62 percent of milk produced by
buffaloes and 34 percent by cows. Approximately 80 percent of milk is produced in rural areas,
with peri-urban areas accounting for 15 percent, and urban areas for 5 percent. Punjab and Sindh
are the major milk producing provinces, with annual production of 25.62 million and 9.35
million litres respectively. KPK produces an estimated 4.88 million liters per year, and
Balochistan 0.81 million litres (PDDC, 2006). Annual milk production from 1998/1999 to
2007/2008 is presented in Figure 1, which shows that it increased by an average of 3.31 percent
per year, or by a total of almost 34 percent. Annual milk production from cows increased from
7.46 million tonnes in 1996 to 9.40 million tonnes in 2006, gaining 26 percent. Milk production
from buffaloes increased from 14.96 million to 21.13 million tonnes, a 41 percent increase
(Government of Pakistan, 1998 and 2009b). This growth is directly proportional to the increase
in human population, resulting in growing demand. The extra volumes are a result of increased
herd size, and cannot be attributed to enhanced animal productivity, which has remained
constant. According to Government of Pakistan (2009), the average annual yields of cows and
buffaloes have remained approximately 453 and 904 kg respectively.

ANNUAL MILK PRODUCTION (MILLION

LITRES)

PUNJAB
SINDH
BALOCHISTAN
KPK
Animal’s contribution and Significance
Buffaloes and cows are the major milk producing animals, with 62 percent of milk produced by
buffaloes and 34 percent by cows.3 Approximately, 80 percent of the milk is produced in rural
areas, with peri-urban areas accounting for 15 percent, and urban areas for 5 percent. Over the
past ten years, milk production in Pakistan has risen by 36 percent (Government of Pakistan,
various years). This gain in production is largely a result of increases in animal population rather
than in animal productivity.

Genetic diversity
Pakistan has 31.8 million cattle and 29 million buffaloes (Government of Pakistan, 2009),
producing 14 million and 26 million tonnes of milk, respectively (Ministry of Food, Agriculture
and Livestock (2009).
Livestock sector is a commercialized sector. There are both organized and unorganized livestock
markets/'Mandis' throughout the country where trading activities take place.

Buffaloes
Buffaloes are the major milk producing animals in Pakistan, representing about 48 percent of the
total dairy herd and providing 62 percent of total milk production (Government of Pakistan,
2008). The three principal breeds are Nili, found mostly in Punjab province, and Ravi and Kundi,
found mostly in Sindh. Due to indiscriminate breeding, most of the herd is “non-descript”. Little
is done to research or maintain the purity of buffalo breeds. The government has undertaken
buffalo breeding projects at livestock research centres, but farmers are largely excluded from the
results of this research, thereby limiting its benefits. Recently, there has been interest in
improving understanding of the complex issues involved in buffalo reproduction.

Cattle
The cattle population is slightly larger than that of buffaloes, but cows produce on average only
about 55 percent of the yield of buffaloes. All Pakistan’s indigenous cattle are Zebu (humped
type, Bos indicus). There are 15 recognized breeds in the country, of which Red Sindhi and
Sahiwal are well known internationally as tropical dairy cattle breeds. Cattle have traditionally
been bred to produce bullocks for ploughing and on-farm operations. A sizable population of
cattle cross-breeds have recently emerged, and now represent 13 percent of Pakistan’s total cattle
population. Pure breeds account for 43 percent, and non-descript for 44 percent (Khan et al.,
2008). Breeding policy allows the cross-breeding of non-descript cattle with Holstein, Friesian
and Jersey breeds, with the desired level of exotic inheritance being between 50 and 75 percent.
The productivity of dairy cattle cross-breeds is far higher than that of local non-descript or pure
breeds, with longer lactation periods, higher milk production per lactation, and shorter calving
intervals. These advantages make cross-bred cattle highly preferred for intensive and semi-
intensive dairy farming systems. An average quality cross-bred animal costs almost 40 percent
more than an average buffalo. Semen for cross-breeding programmes is imported from countries
such as the United States of America, Germany and Australia by private sector firms.
Buffalo milk quality
Comparative milk composition in buffalo, cow and goat is given in Table 4. Buffalo milk is
healthy as it is richer in saturated fatty acids. Its much higher total solids (18–23% vs 13–16%) is
useful for making cheese, butter fat, several kinds of traditional sweets and ice creams. Swamp
buffalo milk has even higher fat (9–15%), protein (7.1%), lactose (4.90%) and ash (0.89%)
(Thac 1979). Buffalo milk is especially important, and priced higher in Italy, for making
Mozzarella cheese.

Economics of buffalo milk production

Buffalo is a more efficient milk producer than an indigenous cow. Studies further revealed that
with higher per buffalo per annum inputs in terms of more green fodder and concentrates, net
annual income per buffalo could be increased substantially .Human labor formed approximately
24% of the total costs of buffalo production. Family labor accounted for 92% of the latter (62.5
man days per animal per annum) at small farm level .This speaks of tremendous benefits being
earned through employment from buffalo farming. Milk is a part of daily food consumption in
Pakistan .Buffalo constitutes, 67% in Pakistan. Price value of milk production in Pakistan tops
all their major crops (e.g., rs 210 billion from milk compared to rs 150 billion from wheat, the
staple food, in Pakistan). Approximately 30% of smallholders in Pakistan sell milk to earn 10–
25% of their income. However, when given, buffalo milk was consumed readily by children and
old people, showing a promising potential to solve child malnutrition (Thu 1997). Collections of
buffalo milk have started for commercial production of ice cream, pastries and candies.

Buffalo meat production

Buffalo meat is very popular in most buffalo loving countries although it comes from culled
animals or surplus males. Of 242 630 374 total world meat, 3 089 875 t comes from buffalo
(FAOSTAT 2003). A Swamp buffalo with 592 kg average live weight yields 277 kg carcass and
215 kg meat (Thu et al . 1995). Calves slaughtered at 18 months of age dress out 50% of the live-
weight.
Quality of buffalo meat
Buffalo meat is lean, tasty and often undistinguishable from beef. A comparative picture of its
nutritional contents is given in Table 1. It contains lower saturated fat than beef and pork, which
is a good dietary value. Buffalo meat contains 40% less cholesterol, 55% less calories, 11% more
protein and 10% more minerals in comparison to bovine meat so is, therefore, healthier.