Dairy Farming Business Plan: All You Need to Know

Table of Contents

Share this article

India is the largest dairy-producing country in the world with a production output of over 196 million tons of milk per annum. Starting a dairy farm can help you reap high profits.

However, the process is significantly different than other farms in terms of set-up and operation. Here’s a helpful guide to help you create the perfect dairy farming business plan.

Is Dairy Farming a Viable Business?

Dairy has been around for thousands of years. It holds traditional as well as cultural significance across the world. While the consumption percentage of milk has altered throughout the years, the use of milk products has seen a sharp increase.

It has been observed that developing and developed countries have some of the highest consumption of dairy products.

In countries like the US, and India, the dairy industry is highly subsidized. Setting up a dairy farm is encouraged and government subsidies lower the prices for the consumers. This results in higher sales, as well as higher profits.

The dairy industry has evolved from what it was 20 years ago. Farms now rely on modern milking machinery to obtain high milk volumes. Specialized cow feed, genetically superior cows, and antibiotics have led to an unparalleled production capacity of dairy farms. Therefore, presently, dairy still remains a popular and viable business option.

Dairy Farming Scenario in India

According to the IMARC Group, the dairy market in India was valued at INR 11,357 billion in 2020. The industry is expected to grow at a CAGR of 15.4% within 2021-2026. With the population rapidly expanding, the dairy industry is far from saturated. It has plenty of scope for potential dairy farmers to scale out.

The long-term aspects of this business also look promising, at least in India. While consumption of milk has declined in the west, it is the exact opposite in India. Apart from producing nearly 22% of the world’s milk, we’re also the highest consumer of dairy products.

The local FMCG market relies heavily on the dairy industry. Popular domestic and international food products rely on milk products such as milk solids, cheese, butter, ghee, etc. These products are sold at a premium compared to milk. Therefore, even in 2021, the dairy industry remains a highly profitable niche.

The success of a dairy farm like all other farms depends on your produce. And to get high-quality products, your cattle need to be in great condition. Thus, keeping your cattle healthy and thriving can be a challenge.

Apart from profits and the challenges of running a dairy farm, you should also consider the aid provided to this sector. As mentioned before, this industry is highly subsidized by the Government and there exist several consultancy firms. So starting this business is all about optimal planning.

Dairy Farming Business Plan

Dairy farming is an all-season business. However, creating a strong business plan allows you to have a clear vision for the business. Additionally, a good business plan helps you with getting loans and grants approved.

Business Research

Researching the industry and the market is the first step towards every business plan. Begin by first learning about the industry. Since dairy farming has a different infrastructure and operational requirements, it is wise to gain an understanding of the business itself. After that conduct a thorough SWOT analysis for your business model.

This will help you find your dairy farm’s USP and highlight the potential challenges. Market surveys and research are best done offline. Visit dairy farms of various calibers and understand how they operate. By doing so you may find interesting observations that you could include in your own model.

Competitor analysis is also important. While large dairy corporations occupy a huge market share, small independent farms are largely popular. This is mainly due to their organic and hygienic appeal. Therefore, do a localized competitor analysis. Which are the most popular local dairy farms around your preferred area? Try to do a SWOT analysis of your competitors as well. This will provide you with a side-by-side comparison.

Training and Consultancy

Operating a dairy farm can be a demanding task. Maintaining the infrastructure, and keeping the cattle healthy is an important task. You will have to manage the farm 24/7.

Therefore, consider undergoing professional training to set up and run a dairy farm. Knowing the right feed for your cattle to maximize milk production, veterinary check-ups, waste management, and milk processing are some of the many processes that need to be carefully done.

A consultancy firm can help you along the way. Agriculture consultants are professionals who have decades of experience in various types of farming. By having such an expert by your side, the chances for error become quite low.

Additionally, consultants can advise you on the best cattle breed, and customize your business plan based on your requirement.

Financial Planning & Marketing

Unlike agricultural farming, dairy farming requires a large area and a sizable investment. Constructing sheds, buying equipment, feed, and hiring maintenance staff can add to costs quickly.

A minimum area of 4000 sq ft is needed to manage a herd of 20 cows. Thus, when you undergo training, you can better assess the costs that will be needed to start a dairy farm. Apart from set-up and running costs for the year, you must also take into consideration the marketing costs.

Marketing is an important aspect of a business. However, several new businesses often neglect it. Identifying the USP of your farm, and then creating an effective marketing mix is highly essential. Therefore, do not forget to allocate marketing costs in your financial breakdown.

NABARD Subsidy

The National Bank for Agriculture and Rural Development (NABARD) started a subsidy under the Dairy Entrepreneur Development Scheme (DEDS). Under this scheme, farmers can get a subsidy of 33% on their total project cost for a loan up to 7 lakhs. However, this scheme is valid for loans from approved banks and NBFCs. While creating your dairy farming business plan, budgeting based on such subsidies can be extremely helpful.

What are the requirements to start a dairy farm?

Dairy farms have numerous requirements. You can learn about all of them through proper training or consultancy. Here are some of the primary requirements.

Infrastructure

The infrastructure required is a piece of land and shed for the cattle. While an acre of land is suggested, where the farmer grows green pastures and maintains a herd of 7-10 cows. However, with the rising prices and lack of area in an urban setting, finding an acre of pasture land may be difficult. Therefore, constructing a cowshed over 4000 sq. ft is easier and more affordable. It is suggested that a dairy farm should have a minimum of 20 cows for the best profits.

Selecting cow breeds

Every cow breed has varying rates of milk production. Therefore selecting cow breeds is an important factor. You will have to take into consideration the lactating period, calf interval, rate of milk production, fat percentage, etc. Additionally, choosing healthy cattle is important. Spotting signs of diseases, low-quality coat, weakness, can save you from major losses. Adding to this, timely vaccinations and veterinary care for your cattle are equally necessary.

Workforce needed

Managing a cow farm is a herculean task. If there is a slight lapse in care, it can largely affect milk production. Therefore, employing someone who has experience is necessary.

The number of workers needed depends upon the farm size. Smaller farms can do with just one additional worker, while others require an entire team for not just milk production but also processing and packaging.

Fodder: Another factor in getting high milk quality is the fodder being fed to the cows. High-quality fodder yields a large amount of milk. Therefore, research the nutritional requirements of your cattle. This may slightly vary from breed to breed but giving your cattle premium fodder is guaranteed to improve milk quality.

Profit in a Dairy Business

Dairy farming can yield high profits if done right. Here is a generalized analysis of how much profit you can expect to generate from a small dairy farm with 6-7 milk cows.

Considering a cow produces 150 liters of milk per day, you can expect a gross profit of over INR 1.1 lakh per month. This profit includes the sale of milk and manure.

However, we need to factor in the expenses to calculate net profit. The expenses in a standard dairy farm are salaries of workers, depreciation, rent, cattle fodder, medicine, water & electricity, and other expenses. All the expenses combined, the total expenses for the month fall under INR 1 lakh.

Therefore, you will end up with a net profit of 10,000 to 15,000 per month. This varies from season to season. In the dairy industry, the quality of fodder changes seasonally and so does the yield quality. Additionally, high-fat milk fetches a higher rate.

But for a farm with just 6 milking cows, this profit margin is quite respectable.

There are several products you can choose to process and sell. The demand for dairy products is on the rise. Apart from milk here are some of the most consumed and profitable dairy products you can consider selling:

  1. Lassi
  2. Dahi (Yogurt)
  3. Paneer (Cottage Cheese)
  4. Buttermilk
  5. Cheese
  6. Flavored Milk
  7. Flavored Yogurt
  8. Dairy Whitener
  9. Milk Powder
  10. Milk Solids

Dairy Farming Training & Resources

As stated above, undergoing professional training to operate a dairy farm is a great way to ensure success. Therefore, here are some of the useful resources to learn and create a dairy farming business plan.

Books on Dairy Farming

  1. Pashu Poshan ( Animal Nutrition ) (Hindi) by  Dr. Ashok Dangi (Author) Dr. L.N. Sankhala (Author), Dr. Manish Vashishtha – Amazon Link
  2. Production Processing and Marketing of Milk and Milk Products by Dr Rajendra Kumar Pandey – Amazon Link
  3. Broke to Breakthrough: The Rise of India’s Largest Private Dairy Company by Harish Damodaran – Amazon Link

Institutes to Learn Dairy Farming

  1. National Dairy Research Institute (Deemed University)
  2. National Dairy Research Institute, Bangalore.
  3. Sheth MC College of Dairy Sciences, Anand, Gujarat
  4. Dairy Science Institute, Aarey Milk Colony, Bombay
  5. College of Dairy Sciences, Udaipur, Rajasthan
  6. Veterinary College, Hebbal, Karnataka

Top Dairy Farming Consultants

  1. Sterling Agro Industries, New Delhi (Website)
  2. AB Enterprises (Website)
  3. Dr. J.V Parekh (Website)
  4. Amol Ghodke (Website)

Conclusion

Although challenging, if planned and executed properly, you can take advantage of the growing dairy industry in India. Unlike western countries, the demand for milk is on the rise in the country. Additionally, if you can manage to scale up your farm and include various milk products with custom branding, the sky’s the limit.

This post is also available in: English Hindi Tamil

Share:

Leave a comment

Your email address will not be published.

Subscribe to Newsletter

Start a business and design the life you want – all in one place

Copyright © 2022 Zocket