Pre-Feasibility Study

Dairy Farm (75 cows)

Environmentally Controlled Housing (ECH) System

Small and Medium Enterprises Development Authority

Ministry of Industries & Production

Government of Pakistan
www.smeda.org.pk

HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road, Lahore
Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
[email protected]

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH KPK BALOCHISTAN

3rd Floor, Building No. 3, 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
Aiwan-e-Iqbal Complex, Complex II, M.T. Khan State Life Building Chaman Housing
Egerton Road Lahore, Road, Karachi. The Mall, Peshawar. Scheme
Tel: (042) 111-111-456 Tel: (021) 111-111-456 Tel: (091) 9213046-47 Airport Road, Quetta.
Fax: (042) 36304926-7 Fax: (021) 5610572 Fax: (091) 286908 Tel: (081) 831623,
[email protected] helpdesk- [email protected] 831702
.pk [email protected] Fax: (081) 831922
helpdesk-
[email protected]

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Pre-Feasibility Study Dairy Farm (75 Cows)

Table of Contents
1 DISCLAIMER.......................................................................................................................................... 3
2 EXECUTIVE SUMMARY ...................................................................................................................... 4
3 INTRODUCTION TO SMEDA ............................................................................................................. 4
4 PURPOSE OF THE DOCUMENT........................................................................................................ 5
5 BRIEF DESCRIPTION OF PROJECT & PRODUCT........................................................................ 5
5.1 DAIRY FARM PRODUCTION PROCESS ............................................................................................. 6
5.2 INSTALLED AND OPERATIONAL CAPACITIES .............................................................................. 10
6 CRITICAL FACTORS .......................................................................................................................... 10
7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT ................................................................... 11
8 POTENTIAL TARGET CUSTOMERS / MARKETS ...................................................................... 11
9 PROJECT COST SUMMARY.............................................................................................................. 12
9.1 PROJECT ECONOMICS........................................................................................................................ 12
9.2 PROJECT FINANCING .......................................................................................................................... 12
9.3 PROJECT COST ..................................................................................................................................... 12
9.4 SPACE REQUIREMENT ........................................................................................................................ 13
9.5 MACHINERY & EQUIPMENT REQUIREMENT ................................................................................ 14
9.6 OFFICE VEHICLE ................................................................................................................................... 15
9.7 FURNITURE & FIXTURES REQUIREMENT ..................................................................................... 15
9.8 OFFICE EQUIPMENT REQUIREMENT ............................................................................................. 15
9.9 HUMAN RESOURCE REQUIREMENT .............................................................................................. 16
9.10 RAW MATERIAL REQUIREMENT ....................................................................................................... 16
9.11 UTILITIES AND OTHER COSTS .......................................................................................................... 18
9.12 REVENUE GENERATION ..................................................................................................................... 19
10 CONTACT DETAILS ........................................................................................................................... 19
10.1 MACHINERY SUPPLIERS .................................................................................................................... 19
10.2 RAW MATERIAL SUPPLIERS ............................................................................................................. 20
10.3 TECHNICAL EXPERTS / CONSULTANTS ........................................................................................ 21
11 USEFUL WEB LINKS .......................................................................................................................... 21
12 ANNEXURES ........................................................................................................................................ 24
12.1 INCOME STATEMENT ........................................................................................................................... 24
12.2 BALANCE SHEET ................................................................................................................................... 25
12.3 CASH FLOW STATEMENT .................................................................................................................. 26
13 KEY ASSUMPTIONS........................................................................................................................... 27
13.1 OPERATING COST ASSUMPTIONS.................................................................................................. 27
13.2 PRODUCTION COST ASSUMPTIONS .............................................................................................. 27
13.3 REVENUE ASSUMPTIONS .................................................................................................................. 28
13.4 FINANCIAL ASSUMPTIONS ................................................................................................................. 28

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1 DISCLAIMER
This information memorandum is to introduce the subject matter and provide a
general idea and information on the said matter. Although, the material included in
this document is based on data/information gathered from various reliable sources;
however, it is based upon certain assumptions, which may differ from case to case.
The information has been provided on as is where is basis without any warranties
or assertions as to the correctness or soundness thereof. Although, due care and
diligence has been taken to compile this document, the contained information may
vary due to any change in any of the concerned factors, and the actual results may
differ substantially from the presented information. SMEDA, its employees or agents
do not assume any liability for any financial or other loss resulting from this
memorandum in consequence of undertaking this activity. The contained
information does not preclude any further professional advice. The prospective user
of this memorandum is encouraged to carry out additional diligence and gather any
information which is necessary for making an informed decision, including taking
professional advice from a qualified consultant/technical expert before taking any
decision to act upon the information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk

Document Control

Document No. PREF-107

Prepared by SMEDA-Punjab

Revision Date September, 2017

[email protected]
For information

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2 EXECUTIVE SUMMARY
This pre-feasibility study is based upon the business analysis of setting up a dairy
farm where cows with proven pedigree and high genetic worth are kept primarily for
milk production in an Environmentally Controlled Housing (ECH) system. The
animals are fed Total Mixed Ration (TMR), which is a high energy and protein rich
nutritionally balanced formulated feed.
Dairy production is basically an all-inclusive activity, related to dairy animal care,
reproduction, feeding and management. It encompasses all aspects and activities
related to raising dairy animals during various phases of life to get maximum
productivity in terms of hygienic milk.
The proposed dairy farm with 75 cows needs a total investment of approximately
Rs. 65.63 million out of which, capital cost of the project is Rs. 64.02 million with
working capital of 1.61 million. The project is assumed to be working on a 50:50
debt and equity ratio. It is assumed that starting from 75 animals in year 1, the herd
of animals will increase to approximately 301 animals, out of which, 173 would be
lactating cows in 10th year of the project. The culling rate is assumed to be 15% per
annum.
The Internal Rate of Return (IRR), Payback Period and Net Present Value (NPV) of
the project, based upon stated assumptions, are 33%, 3.75 years and Rs. 52.60
million respectively. The farm will provide employment opportunity to 8 individuals.
The legal status of the project is proposed to be a sole proprietorship.
The project is proposed to be located in peri-urban & rural areas around
metropolitan cities. Most critical considerations or factors for success of the project
are background knowledge and related experience for application of Good Animal
Husbandry Practices (GAHP), market / demand of milk, understanding of ECH dairy
system and efficient farm management.

3 INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was
established in October 1998 with an objective to provide fresh impetus to the
economy through development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the
national income, through development of the SME sector, by helping increase the
number, scale and competitiveness of SMEs", SMEDA has carried out ‘sectoral
research’ to identify policy, access to finance, business development services,
strategic initiatives and institutional collaboration and networking initiatives.

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Preparation and dissemination of prefeasibility studies in key areas of investment

has been a successful hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business development
services is also offered to the SMEs by SMEDA. These services include
identification of experts and consultants and delivery of need based capacity
building programs of different types in addition to business guidance through help
desk services.

4 PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential
entrepreneurs in project identification for investment. The project pre-feasibility may
form the basis of an important investment decision and in order to serve this
objective, the document/study covers various aspects of project concept
development, start-up, and production, marketing, finance and business
management.
The purpose of this document is to facilitate potential investors in setting up Dairy
Farm (75 cows) with Environmentally Controlled Housing (ECH) system on
commercial basis by providing them a general understanding of the business with
the intention of supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises
by trial and error, and certain industrial norms that become a guiding source
regarding various aspects of business set-up and it’s successful management.
Apart from carefully studying the whole document one must consider critical aspects
provided later on, which form basis of any Investment Decision.
5 BRIEF DESCRIPTION OF PROJECT & PRODUCT
The proposed dairy farm will be established on purchased land with purpose built
shed constructed on Environmentally Controlled Housing (ECH) system. The farm
will begin operations with 75 cows to achieve sellable milk production of 810,095
litres in first year of the project. The initial capacity utilization of milk production for
sales revenue is 95% by year 10. Female calves will be raised on milk replacer for
first three months of age. Upon weaning at 4th month of age, calves will be offered
Total Mixed Ration (TMR) for the rest of their productive life. Breeding of animals
will be planned through ‘Artificial Insemination’ method. Female calves will be given
special attention and raised as ‘Heifers’ whereas male calves are to be sold in the

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market around the age of one month. The milk will be primarily sold to bulk buyers
at the rate of Rs. 60 with 5% annual growth rate in selling price.
The subject business can be set-up at any appropriate location that ensures easy
availability of feed, water and other related services. The development of urban or
peri-urban commercial dairy farms is a relatively new concept in dairy production.

5.1 Dairy Farm Production Process

Selection of dairy cattle breed such as

Holstein Friesian with proven pedigree and
high genetic worth from elite/ superior and
renowned sires. Holstein cows are
recognized by their distinctive color
markings and outstanding milk production,
having large body stature with typical color
patterns of black & white or red & white.
Holstein heifers can be bred at around 15
months of age as they gain 65% of their Figure 1: A typical Holstein Cow
adult body weight (approx. 550 kgs live
body weight). Gestation period of the animal is nine months with normal productive
life of 4-5 years.

The pedigree and genetic worth of cows must be

considered on top priority, i.e. proper pedigree paper
and documentation containing all identifications and
registrations of dairy cows by Holstein Aassociation
from USA or EU. Pedigree is a document showing an
animal’s lineage, a record of their ancestry; a typical
Holstein pedigree shows three generations - the
animal itself, its sire and dam, along with their sires
and dams. May also list genetic and performance
records for each animal, when applicable.

Figure 2: A typical
The pedigree is very important as it can be useful to
Pedigree
farmers and breeders in providing information about
the cow’s ancestors and thereby helping to predict how well that animal may perform
later in life e.g. how much milk might be produced or how they will look in their body
stature and conformation etc., based on the performance of their ancestors. Aside
from providing owners and breeders with detailed information about their animals,
Official Holstein Pedigrees also serve as a verified source of ancestry, performance

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and genetic information when selling animals, giving the buyer trusted
documentation ensuring that information presented on the animal is accurate.

Selection of animals with excellent body condition and udder health: average daily
milk production of 32 litres or above for cows in first lactation, essentially with no
disease history.

Housing: Good housing leads to good management practices and ultimately

optimum production. Generally, housing should be;
I. Pre-engineered building
II. Tunnel-type, ventilated, comfortable and dry with hygienic environment
III. Designed with the probability of future expansion when required

The housing should facilitate;

 Easy drainage and removal of dung, urine and waste material
 Apparent (or feels like) temperature not exceeding 27 °C
 Minimum sun exposure: axis of length to be east to west
 Availability of feed and water round the clock

The Environmental Controlled Housing

(ECH) Dairy Farm is a new and
remarkable revolution in Pakistan’s dairy
sector by creating a self-sufficient
temperature in dairy house. Following are
some of the features of this system which
are quite different from traditional dairy
housing;
 Concrete structure is preferred over
steel with low roof height for easy Figure 3: A typical ventilation
maintenance and access. system in ECH system
 Proper insulation to prevent heat from all sides. Optimum temperature of 26°C
should be maintained inside the shed area. Temperature may be reduced up to
20°C at certain places if required.
 Proper Heating, Ventilation & Air Conditioning Control (HVAC) designed and
planned as per engineering principles as such type of structure is designed to
utilize minimum possible electricity. Electricity cost is much less than traditional
fans barns as only 4 fans of 1.5 HP are used. Negative pressure fans utilize
18~20 fans of same capacity in the same size.
 No gases, odor or smell inside the barn due to proper ventilation system, hence,
animals are comfortable in cool breeze passing through them from all sides. In

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this way, the production efficiency of pedigreed Holstein cows does not suffer in
hot weather resulting in optimum productivity utilization in summers.
 Self-sufficient to produce coal free electricity from manure of cows.
 The structure of the farm is designed in a way to allow natural flow of water
resulting in minimum human efforts for cleanliness.
 There is limited need for extra lighting sources at the farm house in day light due
to semi closed nature of the housing system.
 Electricity cost is markedly less than traditional fan barns.
 The animals should be dehorned, as they are easier to handle in barns, causing
less accidental injuries to other animals and attendants.

 Feeding: The lactating Holstein cows

are fed 1 kg of Dry Matter (DM) feed per
1.75 litres of milk produced. The ration
allows nutritionally balanced feed in 24
hours. It includes dry matter with 60%
concentrate and 40% roughages
containing 16% Crude Protein (CP) and
Figure 4: A Typical TMR wagon
energy to increase animal productivity. It
is better to use Total Mixed Ration (TMR) wagon for feeding the cows.
 Watering: Supply of clean drinking water in clean troughs i.e. 50 to 80 litres of
water consumption per adult animal per day, round the clock, maintains milk
production capacity of the animal.
 Breeding: Efficient and timely Artificial Insemination (AI) of good genetic worth
is a key to success in good breeding programs of herd.
 Calving: Pregnant animals should be given special attention in third trimester of
pregnancy and should be separated in pregnancy pens. Veterinary assistance
should be sought out in case of emergency. Calf care and heifer management
is very important in maintaining dairy farm production. The proposed farmer will
raise female calves as future breeding heifers which will replace culled dairy
animals. The first generation (F1) will be capable of breeding at age of 14
months; hence producing milk at about 23-24 months of age.
 Lactation Period: lactation period is the period during which animals yield milk
after calving. The animals producing milk are called ‘Wet Animals’. Generally
standard lactation period is taken as 305+ 5 days. This pre-feasibility study has
taken 50-65% of the total number of animals as wet cows. The calving interval
(interval between two calving) in Holstein cows is 12-14 months. The average
daily milk yield of a cow is 35 litres.

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 Udder health: Hygienic and clean milking three times a day (morning/afternoon/
evening) lowers chances of mastitis as udder health and hygiene is most
important in dairy animals.
 Proper storage of milk should be done preferably at temperature of 4 0c.
 Disease management: Vaccination & medicine is required to prevent any
disease outbreak in the dairy herd. Each animal will be vaccinated before
entering the farm. Procurement of vaccines from reliable sources should be
sought. Following is a tentative vaccination schedule;
Table 1: Tentative Vaccination Schedule
Time for Dose/
Disease Vaccine
vaccination Administration
Foot & Mouth FMD February/March & 5 ml sub cut.
Disease September/October
Black Quarter BQ March/April 5 ml sub cut.

Haemorrhagic HS May/June & 5 ml / 300 kg body wt.

Septicemia November/December sub cut.
Anthrax Anthrax August 1 ml sub cut.

Brucella BA Once in life for 1ml sub cut.

Abortus heifers (4-12 months
of age)

 Record keeping: The animals should be ear-tagged with information of animal

such as breed, age, date of birth/ purchase, number of lactations, vaccination
etc. The records for daily milk yields, weight, Artificial Inseminations (AI), calving,
vaccination and medication etc. are also important.
 Culling: Good productive animals should be selected and uneconomical
animals should be culled. Low yielding culled animals may be sold in the regular
livestock market. On an average, cows are productive for 7 to 8 years. The
culling rate of 15% per annum in the total herd is desirable for a successful dairy
farm.
 Regular technical assistance from dairy and livestock professionals, experts
and technical consultants is advised.
Returns on the proposed business and its profitability are highly dependent on the
efficiency of above mentioned factors. In case a dairy farm is not able to attain its
target milk production or implement effective husbandry practices, it will not be able
to cover the potential market and recover payments; hence, cost of operating the
business will increase.

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5.2 Installed and Operational Capacities

In the proposed study, initially, 75 cows are recommended to obtain optimum milk
production in first year of project. It is assumed that on average, 60-65 % of total
animals present at farm would be in lactation on farm. The female calves born at
farm will be added to the milking herd through heifer management; hence total
number of animals to be 301, among which, 173 animals will be in lactation in 10th
year of project. The male calves will be sold in open market. Average milk production
of cows during one lactation period is estimated to be 10,500 litres. The dairy farm
will have the capacity to generate revenues at total sellable milk produced at farm
i.e. 810,095 liters in its first year of operation.

The annual mortality rate is assumed to be 5% for newborn calves, 1% for heifers
and 2% for adult cows. The project will operate at 95% of its installed capacity from
the first year of operations.

6 CRITICAL FACTORS
The most critical considerations or factors for success of the project are:
 Background knowledge and related experience of the entrepreneur in dairy
farm operations.
 Application of good husbandry practices such as timely feeding, watering and
vaccination to ensure animal’s health and disease-free environment.
 Awareness about supply and demand of milk in the market as demand of
milk is relatively higher in summer as compared to winter season.
 Efficient marketing of the project and bulk supply to wholesalers.
 Dairy farming is highly complex due to breeding, management, feeding,
housing, disease control and hygienic production of milk on farm.
 Culling of low yield animals as early and efficiently as possible.
 Overall genetic improvement of all dairy animals for improved milk production
by noting milking records at equal intervals, selection of semen from progeny-
tested bulls from high producing dams (mothers) and making its extensive
use in well-organized Artificial Insemination (AI) program.
 Other farm management practices include feeding for growth, lactation,
pregnancy or maintenance, hygienic milk production, comfortable and
ventilated barns, spraying of animals in summer, timely detection of heat and
AI service. Timely breeding of animals within the 60-90 days of calving to
improve overall performance of herd.

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 Timely vaccination against mentioned diseases such as Rinderpest, Black

Quarter, Foot and Mouth Disease and Brucellosis.
7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT
Commercial dairy farming is a viable business proposition for peri-urban areas of
Pakistan. There is higher demand for milk in peri urban areas around the major cities
such as Karachi, Hyderabad, Sakkar Lahore, Faisalabad, Sheikhupura,
Bahawalpur, Multan, Jhang, Sahiwal, Pakpattan, Okara, Jehlum, Peshawar,
Charsadda, D.I. Khan, Quetta, etc. across the country. Hence, the proposed project
offers good investment opportunities for potential investment in all provinces of
country. The peri-urban areas around major cities with abundant water and
availability of fodder make a better choice for farming; provided there is ready
access to livestock related marketing and veterinary services.

8 POTENTIAL TARGET CUSTOMERS / MARKETS

This pre-feasibility study suggests that milk will be sold at the farm gate directly to
the consumers or milk contractors. It can also be sold directly to milk centers in the
urban market or may be pasteurized at farm by the farmer and delivered to the
nearest city, however it involves extra investment which is not included in this
prefeasibility study. Milk contractors collect milk from farmers and deliver it to the
consumer’s doorstep. Milk collection networks of different processing companies
also collect milk directly from the farm and transport it to the processing facilities.

Apart from Lahore, Sialkot, Kasur, Gujranwala, Bahawalpur, Okara, Quetta, D.I.
Khan etc., commercial dairy farming in peri-urban locations takes place around all
major cities. Metropolitan cities are considered major markets for the sale of milk.
Following are some of the target clients for a dairy farmer;
• Domestic consumers
• Milk contractors and suppliers
• Milk collection and processing companies
• Dairy products manufacturing companies
• On-farm Processing by farmer (however, it requires minimum viable capacity
of 40,000 liters of milk daily)
The cost of production per litre of raw milk should be lower than its sale price so that
the farmer finds it economical. The daily milk intake of Lahore & Karachi is 3 million
litres and 5 million litres respectively. The demand for milk increases during
summers as consumption of whey (lassi) increases due to hot weather. Yogurt or
curd is another popular product. These are high value products however with
relatively short shelf life.

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Milk processing companies use milk as a raw material to formulate different types
of milk i.e. pasteurized milk, UHT treated milk, condensed milk, skim milk & milk
powder, etc. Different value added products like ghee, khoya, yogurt, ice cream,
butter and cheese are also prepared from raw milk. Processed milk market has
increased its share in quality conscious consumers. Processed milk has achieved
4% share in Lahore milk market during the last two decades. Milk supply is
increasing at the rate of 4% annually, however demand is increasing at 15%
annually.
9 PROJECT COST SUMMARY

9.1 Project Economics

The financial model for this pre-feasibility study indicates estimated revenue of Rs.
50.07 million in first year of the project. The capacity utilization during year one is
95%, which will remain the same throughout the life of the project. The following
table shows Internal Rate of Return, payback period and Net Present Value of the
proposed venture.
Table 2: Project Economics
Description Details
Internal Rate of Return (IRR) 33%
Payback Period (Yrs.) 3.75
Net Present value (Rs.) 52,606,132

9.2 Project Financing

Following table provides details of equity required and variables related to bank
loan;
Table 3: Project Financing
Description Details
Total Equity (50%) Rs. 32,816,986
Bank Loan (50%) Rs. 32,816,986
Markup to the Borrower (%age / annum) 12%
Tenure of the Project (Years) 5

9.3 Project Cost

Following fixed and working capital requirements have been identified for operations
of the proposed business.

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Table 4: Project Cost

Description Cost (Rs.)
Capital Cost
Land 4,607,763
Building and infrastructure 24,739,313
Machinery and Equipment 3,709,900
Purchase of Cows 30,000,000
Furniture & Fixture 230,000
Office Equipment 68,000
Office Vehicles 73,500
Pre-operating Cost 592,000
Total Capital Cost 64,020,476
Working Capital
Raw Material Inventory 829,906
Upfront Insurance Payment 189,170
Cash 594,420
Total Working Capital 1,613,496
Total Project Cost 65,633,972

The proposed pre-feasibility is based on the assumption of 50% debt and 50%
equity, however this composition can be changed as per requirements of the
investor.

9.4 Space Requirement

Space requirement for the proposed dairy farm is calculated considering
requirements for management office, sheds for cows, calves and dry animals, milk
chiller rooms, storage, open paddocks etc. Details of space requirement and cost
related to land & building are given below;
Table 5: Space Requirement
Description Estimated Unit Cost Total Cost
Area (sq. ft.) (Rs.) (Rs.)
Shed for Wet Cows 16,000 1,000 16,000,000
Open Paddock for Wet Cows 32,000 10 320,000
Shed for Dry Cows 6,000 500 3,000,000
Open Paddock for Dry Cows 12,000 10 120,000
Shed for Calves 3,000 500 1,500,000
Open Paddock for Calves 6,000 10 60,000
Stores (fodder, concentrate & 400 750 300,000
machines)

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Room (chillers, utensils & milk 144 1,000 144,000

storage)
Silage / Hailage Bunker (sft.) 6,844 350 2,395,313
Residence (Manager) 120 2,000 240,000
Admin / Accounts Room 120 2,000 240,000
Washroom (Executives) 24 2,000 48,000
Rooms (Workers) 240 1,250 300,000
Washrooms (Workers) 48 1,500 72,000
Total Infrastructure 82,940 24,739,313

Total investment in building and infrastructure is approximately Rs. 24,739,313.

Shed will increase if there is any increase in number of animals in the herd. The
housing of labor & management staff and room for chiller utensils and milk storage
would be constructed on the first floor.
Land is to be purchased as per maximum space requirements of the farm for 10
years. Total land requirement is approximately 18.43 kanals at an average price of
Rs. 0.25 million per kanal.

9.5 Machinery & Equipment Requirement

Following farm machinery and equipment are needed to run daily farm operations;
Table 6: Machinery & Equipment

Quantity Unit Cost Total Cost

Description
(No.) (Rs.) (Rs.)
Calf Feeder (New born calves) 7 1,200 8,400
Calf Cages 10 12,000 120,000
Cooling System 1 1,000,000 1,000,000
Water Turbine 1 100,000 100,000
Milking Line 6 150,000 900,000
Generator (50 KVA) 2 300,000 600,000
Milk Chiller (2,300 litres) 1 700,000 700,000
Milk Testing Machines 1 20,000 20,000
Velocity Meter 1 1,500 1,500
Surgery Kit 1 10,000 10,000
AI Equipment 2 50,000 100,000
Dystocia Kit 1 20,000 20,000
Energy Savers-Farm 75 400 30,000
Miscellaneous 100,000

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Total Machinery & Equipment 3,709,900

It is assumed that electricity infrastructure and installations along with a transformer
are already available, hence calculations do not include these costs.

9.6 Office Vehicle

Following office vehicle is needed for the farm;

Table 7: Office Vehicle

Description No. Cost / Unit (Rs.) Total Cost (Rs.)
Motor Cycle 1 70,000 70,000
Registration fee 3,500
Total cost 73,500

It is assumed that Rs. 10,000 per month will be required to cover travelling expenses
in order to carry out essential operations of the farm, translating to an expense of
Rs. 120,000 per annum.

9.7 Furniture & Fixtures Requirement

Details of furniture and fixtures required for the project are given below;

Table 8: Furniture & Fixture

Description Quantity Unit Cost Total Cost
(Rs.) (Rs.)
Tables 2 15,000 30,000
Chairs 4 5,000 20,000
Fans 4 4,000 16,000
Energy Savers 10 400 4,000
Misc. Furniture for Workers 100,000
Air Conditioner 1 60,000 60,000
Total Furniture & Fixtures 230,000

9.8 Office Equipment Requirement

Following office equipment will be required for the dairy farm;

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Table 9: Office Equipment

Description Quantity Unit Cost Total Cost

(Rs.) (Rs.)
Computer 1 40,000 40,000
Computer printer 1 15,000 15,000
Misc. equipment 1 10,000 10,000
Cell phones 1 3,000 3,000
Total 68,000

9.9 Human Resource Requirement

In order to run operations of the farm smoothly, following human resources along
with number of employees and monthly salary are recommended;

Table 10: Human Resource Requirment

Description No. of Monthly Salary Total Salary

Employees (Rs.) Year 1 (Rs.)
Owner / Farm Manager 1 100,000 1,200,000
Farm Supervisor 1 30,000 360,000
Workers: Cows 4 15,000 720,000
Workers: Calves 1 15,000 180,000
Security Guard 1 16,000 192,000
Total 8 2,652,000

9.10 Raw material Requirement

Following tables show raw material requirement to run the proposed dairy farm in
first year of production;

Table 11: Feeding Requirements for one Cow* in Year 1

Total Cost in
Daily Feed Rate Daily Feed
Description Year 1
Allowance (Kgs) Rs./ Kg. Cost (Rs.)
(Rs./ Cow)
Total Mixed
22.75
Ration 30 683 249,113
(@ 3.5 % of Live BW)
(TMR)

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*Average adult Live Body Weight (BW) of cow is assumed to be 700 kg with 35 liters of daily milk
production for one lactation. For the calculation purpose, the total milk production of 9,750 litres in
one lactation period is distributed in 365 days. One lactation period of Holstein Friesian cow is
estimated to be 305 +_ 5 days.

Table 12: Feeding Requirements of One Female Calf** (from birth till one
year of age) in year 1
Daily Feed Daily Total Cost
Rate
Description Allowance Feed Cost in Year 1
Rs./ Kg
(Kgs) (Rs.) (Rs./ Calf)
Milk Replacer (First 3 6 liters 40 240 21,600
months of age per
calf)
TMR (from 4th to 12th 8.3 30 249 68,063
months of age) (@ 3 % of live BW)

Total 89,663
**Average birth weight of the new born calf is 35-40 kgs. At the time of weaning at three months
of age, it is 150 kgs which increases up to 400 kgs at the age of one year.

Table 13: Feeding Requirements of One Heifer (1 year older)*** in year 2

Description Daily Feed Rate (Rs./ Daily Feed Total Cost in

Allowance Kg) Cost Year 1
(Kgs) (Rs.) (Rs./ Heifer)
TMR 13.5 30 405 155,216
(@3% of Live BW)
***Average Live body weight (BW) of heifer, older than one year is assumed to be 550 kgs.

Table 14: Total Cost of Feeding in Year 1 and 2

Description Total Cost (Rs.)****
No. of Year 1 No. of Year 2
Animals Animals
Lactating Cows 67 16,628,259 59 15,364,512
Female Calves (younger 36 3,194,227 28 3,189,366
than one year)
Heifers (Female calves - - 29 4,423,663
older than one year)
Total 103 19,822,486 116 22,977,541

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****Prices are rounded off to near decimal point for 365 days of feeding. The number of animals are
calculated after mortality count which is 7% in new born, 3 % in female calves older than one year
and 2% in adult cows.

Table 15: Total Cost of Vaccination, Medication and AI in Year 1

Description Rs./ Animal Total Cost in year 1 (Rs.)
Vaccination and Medication 1,000 95,250
Artificial Insemination (AI) 5,000 333,750
Total 6,000 429,000

9.11 Utilities and other costs

An essential cost to be borne by the project is the cost of electricity. Direct electricity
expenses of the dairy farm are estimated to be approximately Rs. 115,363 per
month i.e. Rs. 1,384,350 annually. The type of electricity connection is Industrial B-
1 Category and one time connection charges are Rs. 35,000. It is further assumed
that within the cooling system, the cone exhaust fans with water motor will operate
for 12 hours per day. The milk chiller and energy savers will operate for 12 hours
per day (average) throughout the year. The water turbine will operate for 2 hours
daily (average). The milking line will operate for 7 hours daily (average) to carry out
three milking sessions daily for a herd of 75 cows.
The indirect or regular electricity expense for management building and staff
residence is assumed to be approximately Rs. 7,500 per month or Rs. 90,000 in
year one of the project.
The fuel cost (diesel) for running generator set in case of absence of electricity is
assumed at an average 4 hours daily; for a monthly expense of Rs. 78,240 or Rs.
938,880 annually in first year of operations.
Machinery maintenance expense is assumed to be Rs. 10,000 per month or Rs
120,000 in year one.
Monthly expenses related to travelling, communication and office vehicle running
are Rs. 120,000, 96,000 and 60,000 respectively.
Professional fees related to any legal, audit or technical consultation is assumed to
be Rs. 50,069 per year.
Insurance of equipment, machinery and office vehicle is assumed to be 5% of total
cost, which is Rs. 189,170 in first year of operations.

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9.12 Revenue Generation

Based on capacity utilization of 95% for revenues from milk production from 75
cows, sales revenue during the first year of operations are shown in the following
table. However, capacity has been increased at 5% for a maximum utilization of
95%.
Table 16: Revenue Generation – Year 1

Description Unit Annual Price Total Revenue in

Production (Rs./Unit) Year 1 (Rs.)
Sale of Milk No. of 810,095 60 48,605,681
Liters
Sale of male calves No. 34 10,000 338,438
Sale of culled cows No. 7.5 150,000 1,125,000
Total 50,069,119
The annual culling rate is 15% applicable to all animals in the herd.

10 CONTACT DETAILS
In order to facilitate potential investors, contact details of private sector Service
Providers relevant to the proposed project are given hereunder.

10.1 Machinery Suppliers

Profarm Pakistan Pvt. Ltd.
Plot No. 52, Block R-1,
M. A. Johar Town, Lahore, Pakistan.
T: +92 (0)42 35291992-4 (3 lines), F: +92 (0)42 35291995
E: [email protected], Customer Service (24/7): +92 323 8888 211
Dairy Solution Pvt. Ltd.
177/B- Johar Town, Lahore
Ph: +92-42-35169450 +92-42-35169451
Fax +92-042-35169449
Cattle Kit Pvt. Ltd. Pakistan
104-A, Punjab Government Servants Housing Society Near Mohlan Waal,
Lahore
Ph: +92 (042) 35978500-3
Email: [email protected]
Web: www.cattlekit.com.pk

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10.2 Raw Material Suppliers

Feed Suppliers
Hi-Tech Feeds Pvt. Ltd.
1-A, Shadman Chowk, Jail Road, Lahore.
Ph: 042-37564503
Shareef Feeds Pvt. Ltd.
7-A, New Muslim Town, Lahore.
Ph: 04235758233-5
National Feeds Pvt. Ltd.
171- Shadman – II Lahore.
Ph: 042 37551405-8
Anmol Vanda
c/o Livestock and Dairy Development Department, Govt. of Punjab,
16-Cooper Road, Lahore
Free Landline: 0800-78685, 0800-78686
Big Feed Pvt. Ltd.
2-A, Ahmad Block, New Garden Town, Lahore.
Ph: 042-35835374-35835373
AI / Semen Suppliers
Ghazi Brothers
B-35 KDA Scheme No 1,
Mian Muhammad Shah Road, Karachi.
Ph: 021-4543579
World Wire Sires by Maxim International Pvt. Ltd.
69-A, Sector-XX, Khayaban-e-Iqbal, DHA, Lahore.
Ph: 042-35693993
Altaf & Co.,
Altaf & Co Plaza, 16/1, Out Fall Road, Lahore.
Ph: 042-35763411-4
Milk Contractors/ Processors
Engro Foods Pvt. Limited
5th, 6th Floor, Harbor Front Building
Marine Drive, Block 4, Clifton, Karachi.
Ph: +92 21 3529-6000 (10 lines)
Nestle Pakistan
308, Upper Mall, Lahore,
Ph: 042-35757082-95, UAN +92-42-111637853
Holstein Cow Suppliers

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The pedigreed Holstein breed cows with average daily milk production capacity
of 35 liters of EU and USA origin may be found from following sources;
1. Holstein Association USA (www.holsteinusa.com)
2. United States Livestock Exporters Association (USLEA)
(www.livestockexportersusadotcom.wordpress.com)
3. Veepro Netherland (www.veepro.nl)
4. Mr. Berg, Berg Exports, Netherlands ([email protected])
5. Mrs. Karin, Ugerup Cattle Exports Sweden ([email protected])
6. Mr. Johan, Hun land Exports from Holland (www.hunland.com)
7. Mrs. Renee, Strickland Global, USA (www.stricklandglobal.com)

10.3 Technical Experts / Consultants

Dr. Sami Ullah.
Farm Manger
Infinite Dairy Farm, Sargodha.
Cell: 0323-4360006
Dr. Rami Hamad
Farm Manager,
Nishat Dairy Farm, Sukheki,
Cell: 0302-8556301
Dr. Nasir Javed
Consultant
Lead Foundation, West wood Colony, Lahore
Cell: 0300-8432595
Dr. Zafar Ullah Khan
Manager, Livestock
Altech Pvt. Ltd.
Cell: 0302-8543005

11 USEFUL WEB LINKS

Links of Federal & Provincial Government, Semi Government and other (sector &
Cluster based) Development organizations are given under to get benefit from the
services offered.
Table 17: Useful Web Links
Small & Medium Enterprises Development Authority www.smeda.org.pk
(SMEDA)
Government of Pakistan www.pakistan.gov.pk
Ministry of Industries & Production www.moip.gov.pk
Ministry of National Food Security & Research www.mnfsr.gov.pk

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Government of Punjab www.punjab.gov.pk

Government of Sindh www.sindh.gov.pk
Government of Khyber Pakhtunkhwa www.khyberpakhtunkhwa.gov.pk
Government of Balochistan www.balochistan.gov.pk
Government of Gilgit Baltistan www.gilgitbaltistan.gov.pk
Government of Azad Jamu Kashmir www.ajk.gov.pk
Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk
Security Commission of Pakistan (SECP) www.secp.gov.pk
Federation of Pakistan Chambers of Commerce and www.fpcci.com.pk
Industry (FPCCI)
State Bank of Pakistan (SBP) www.sbp.org.pk
Punjab Small Industries Corporation www.psic.gop.pk
Sindh Small Industries Corporation www.ssic.gos.pk
Punjab Board of Investment & Trade (PBIT) www.pbit.gop.pk
Sindh Board of Investment (SBI) www.sbi.gos.pk
Pakistan Agricultural Research Council (PARC) www.parc.gov.pk
Balochistan Agricultural Research Centre (BARC) www.parc.gov.pk
Southern-zone Agricultural Research Centre www.parc.gov.pk
(SARC)
Arid Zone Research Institute (AZRI) www.parc.gov.pk
Punjab Livestock & Dairy Development Board www.plddb.pk
University of Agriculture, Faisalabad, www.uaf.edu.pk
Lasbela University of Agriculture, Water & Marine www.luawms.edu.pk
Sciences, Lasbela
Sindh Agriculture University, Tondojam www.sau.edu.pk
Gomal College of Veterinary Sciences, Dera Ismail www.gu.edu.pk
Khan
KPK Agricultural University, Peshawar www.aup.edu.pk
Pir Mehr Ali Shah Arid Agricultural University, www.uaar.edu.pk
Rawalpindi
University College of Veterinary & Animal Sciences, www.iub.edu.pk
Islamia University Bahawalpur (IUB),
University of Veterinary & Animal Sciences (UVAS), www.uvas.edu.pk
Lahore
Bahauddin Zakariya University (BZU), Multan www.bzu.edu.pk
Animal Husbandry In-Service Training Institute
(AHITI), Peshawar
Veterinary Research Institute (VRI), Punjab
Agribusiness Support Fund (ASF), Lahore, www.asf.org.pk

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Livestock and Dairy Development Department, www.livestockpunjab.gov.pk

Punjab
Livestock & Fisheries Department, Sindh www.sindh.gov.pk
Agriculture & Livestock Department, KPK www.khyberpakhtunkhwa.gov.pk
Livestock & Dairy Development, Balochistan www.balochistan.gov.pk

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12 ANNEXURES

12.1 Income Statement

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12.2 Balance Sheet

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12.3 Cash Flow Statement

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13 KEY ASSUMPTIONS

13.1 Operating Cost Assumptions

Description Unit Details

Machinery Maintenance Rs./ Month 10,000
Direct Electricity Rs./ Month 115,363
Office vehicle running expenses Rs./ Month 5,000
Office Expenses (entertainment, Rs./ Month 8,120
janitorial, stationery etc.)
Communication Expenses Rs./Month 8,000
Promotional Expenses Rs./ Month 83,449

13.2 Production Cost Assumptions

Description Unit Details

Annual installed capacity No. of cows 75
Milk production starting capacity % 95
Utilization
Maximum production capacity utilization % 95
Total milk production Liters/ cow/ lactation cycle 10,500
Number of female calves in year 1 No. 29
Average number of days in Lactation No. of days 305+_5
Purchase price of pregnant cow Rs. per cow 400,000
Cost of Artificial Insemination (AI) Rs/ animal/ year 5,000
Cost of vaccination and medication Rs./animal/year 1,000
Mortality in new born calves % of total animals/ year 5
Mortality in adult cows % of total animals/ year 2
Mortality in heifers (females calves older % of total animals/ year 1
than one year)
Shed space per cow Sq. Ft. per animal 80
Open paddock space per cow Sq. Ft. per animal 160

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13.3 Revenue Assumptions

Description Unit Details

Initial Herd Size: No. of Cows No. 75
Maximum Herd Size: No. of Cows No. 301
Production capacity (ltrs / cow / day) Ltrs 35

Milk sale price in year 1 Rs. / Litre 60

Culling price male calves in year 1 Rs. / Animal 10,000
Culling price female cows in year 1 Rs. / Animal 150,000
Sale price growth rate 5%

Asset base calculations

Lactating animals Rs. 400,000
New born female calves Rs. 50,000
1 year plus female calves Rs. 150,000

13.4 Financial Assumptions

Description Unit Details

Debt: Equity Ratio Ratio 50:50
Interest Rate % per annum 12
Debt Tenure Years 5

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