Cost of Milk Production and Break Even Analysis of Member and Non Member of Dairy Cooperative Society For Milch Animals (Cow & Buffalo)
Cost of Milk Production and Break Even Analysis of Member and Non Member of Dairy Cooperative Society For Milch Animals (Cow & Buffalo)
Cost of Milk Production and Break Even Analysis of Member and Non Member of Dairy Cooperative Society For Milch Animals (Cow & Buffalo)
KEYWORDS
Breakeven Point (BEP); Marginal cost; Marginal Return; Cost of Milk; Milk Production; Dairy Cooperative Society.
SUBJECT CLASSIFICATION
Agriculture Management
TYPE (METHOD/APPROACH)
Survey/Interview with mathematical Analysis
INTRODUCTION
As per an assessment made by the Planning Commission Report-2012, the domestic demand for the milk by 2020-21 is
expected to be 172.20 million tons. India would have sufficient production to meet such demand. The international body on
the farm sector in its latest „Food Outlook‟ report also estimates global milk production in 2020 grow by 2% to 772million
tones.
India‟s milk production rise by 4% i.e., 127.9 million tonnes in 2011-12 and per capita availability was 291 gms/day while
in 2010-11 milk production was 121.8 million tones and per capita availability was 281 gms/day. *. In domestic market
demand of milk and dairy products is increasing very high but the production processing facilities of milk in India is not up-
to the mark.
The main milk producing states in India in order of output are Uttar Pradesh, M.P., Rajasthan, Gujarat and Haryana, which
supply more than 80 percent of the total milk production of the country but on the basis of per capita milk consumption
Punjab ranks first followed by Haryana, Rajasthan, Gujarat, M.P., Uttar Pradesh, Andhra Pradesh, Tamilnadu, Maharastra
and Bihar respectively though our country has the largest population of milch animals i.e. 19.1 crore cattle including 6.9
crore buffaloes (1982 ansus) but the milk production is very low being 157 kg per animal as compared to 7154 kg in USA,
3950 kg in UK and 3902 kg in Denmark.
Cost plays an important role in portraying economic viability of a dairy enterprise. It is a critical economic indicator for milk
producers, consumers and policy makers in order to provide an effective linkage between the milk producers and
consumers for fixing the price of milk rationally. Generally, a milk producer can increase his dairy income in two ways
either by increasing the milk production or by reducing cost of milk production. Cost of milk production often becomes a
policy issue, when milk producers complain that the price of milk they are getting does not the cover cost of milk
production. Keeping the above background in mind, it is necessary to study the comparative analysis of per liter cost of
milk production as well as break even analysis of both group of member and non members of dairy cooperative society for
all the category(landless, marginal, small, medium and large) in case of milch Cow and buffalo.
"Etawah" in Uttar Pradesh is famous for its Bhadawari breeds of buffalo and Jamunapari breed of goats. The said breed
of buffalo were also known for consuming less fodder relative to production of high fat content milk. However, all the milch
animals such as buffalo, cow and goats are grazed in the ravines and the forest area between Jamuna and Chambal
rivers of Etawah district of U.P. The number of milch livestock of Etawah district during 2012 were reported as total
number of female adult cows 1,10,825,total number of adult females buffaloes 92065 and total female adult goats were
2,41,61.
The trend shows that very soon Etawah district will get an important place in the future, map of “milk Grid” of India by
producing on an average of 2.801 lakh liters per day during 1986-87 which was increased to 3.83 lakh litres per day
during 2006-07 and now 2011-12 it will be increasing 5.20 lakh litres per day. There were 3020 cooperative milk
producer- societies during 1986-87, which has increased to 4272 during 20011-12. Cooperative milk societies of Etawah
produced 0.22 lacs liters/day in 1986-87 while they produced 2.53 lacs liters/day in 2006-07. Recently the latest
production of milk in 2011 -12 was 3.86 lacs liters/day.*
Review of Literature
Attempts have been made to review briefly the specific and relevant literature, which has direct or indirect bearing on the
objectives of the present study. Accordingly, relevant literature has been reviewed and presented in chronological order as
follows.
Rao and Singh (1995) while studying the impact of operation flood programme on the economics of the buffalo milk
production in Guntur district of Andhra Pradesh found that the gross cost of milk production was Rs.2,982.05, Rs.3,274.05,
Rs.2,744.80, Rs.2,682.75 per annum on landless, small, medium and large categories in the case of the beneficiary
households as against Rs.2,544.05, Rs.2,252.05, Rs.2,113.35 and Rs.2,314.10 per annum on landless, small, medium
and large categories for the non-member households. The average cost of milk production was Rs. 2.80 per litre on the
beneficiary households as compared to Rs.3.75 per litre on the non-beneficiary households.
Shiyani and Singh (1995) conducted a study on economics of milk production for the member and non-member milk
producers in the Saurashtra region of Gujarat and observed that the net cost of maintaining a buffalo was Rs.36.30,
Rs.40.15, Rs.24.35 per day in rainy, winter and summer seasons in the case of the member respondents as against
Rs.32.49, Rs.37.97 and Rs.26.10 per day for the non-member respondents. The corresponding figures for the milch cow
were Rs.17.52, Rs.19.27and Rs.16.93 in the case of the member respondents as against Rs.16.13, Rs.20.14 and
Rs.16.46 per day in the case of non-member respondents. The season wise analysis indicated that the highest cost of
milk production per day was found in winter season both in the case of members and non-members. The main reasons for
the higher cost during winter season were better feeding and management practices adopted by the milk producers to
obtain more milk yield. Further, it was observed that feeds and fodder constituted about 70 per cent of the total
maintenance cost of a milch buffalo and nearly two-thirds of the total cost of cow milk production. On an average, per litre
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cost of buffalo milk production was Rs.5.56 and Rs.6.47 for members and non-members, respectively. Corresponding
figures for milch cows were Rs.4.12 and Rs.4.63.
Shukla et al. (1995) studied the impact of Operation Flood Programme on the economy of rural milk producers in Kanpur
district – Dehat (UP) and found that the overall average cost per milch animal and per household per annum was found to
be Rs.7,588 and Rs.18,286, respectively in the programme area as compared to Rs.6,854 and Rs.11,584 in the non-
programme area. The average cost of milk production per litre was found to be Rs.3.59 and Rs.3.67 in programme and
non-programme areas, respectively. The overall average milk production per day per household was higher at 8.78 litres
in the programme area as compared to 6.04 litres in the non-programme area. The average milk consumption per day per
household was 2.23 litres and 1.92 litres in the programme area and non-programme area, respectively.
Shah et al. (1996) conducted a study on milk production, marketed surplus and marketing of milk in organized and
unorganized milk marketing sector of Bullandshahar district. The results of the study revealed that the level of milk
production was higher in villages covered by DUSS than those not covered under it NDUSS. On an average, the annual
milk production per household was 4504 litres in DUSS and 3964 litres in NDUSS area. The milk production increased
with the increase in herd size category in both areas. Milk production in DUSS area was 2378, 5225 and 8301 litres for
small, medium and large herd size categories, respectively, whereas it was 2045, 4079 and 8094 litres for small, medium
and large herd size categories in NDUSS area, respectively.
Koshta, A.K. & Chandrakar, R. (1999), explored the difference between members and non member of milk co-operative
societies with regard to distribution pattern of dairy animals productivity costs and returns of milk production and disposal
pattern of fluid milk. Non member were observed to have higher operational costs per cow per day and lower cow
productivity than member of milk co-operative societies. Returns are higher for non member as they obtain higher price
than members. Cost benefit ratio is higher for buffalos than cow due to low operational cost of milk production.
Pranajit Bhowmilk, Smita Sirohi and Dhaka. J.P. (2006) analysed that the net cost of milk production from crossbred
cows is nearly half of the same from local cow, thus in the economic interest of the farmers, strategies aimed at crossing
nondescript cattle with superior germplasm should be intensified by the concerned state department. The contribution of
technological component in higher milk production for cross breed cows is about 68 percent, thus, propagation of
crossbreeding in the region has the potential to ensure reasonable returns of investment. The annual value of inputs
saved in one district alone, covers 87 percent of the expenditure on dairy development made by the state in four years.
Therefore, from the planners‟ perspective also, it is a winsome proposition.
Singh, K. M. et. al., (2012), Dairy farming has emerged as an important source of livelihood, particularly on small holder
households. The efficient management of dairy cooperative system has facilitated milk production and marketing in Bihar.
An attempt was made to analyze the milk contribution to dairy co-operative, producers‟ share in consumer rupee and cost
of milk production in Bihar. Per litre cost of milk production varied from Rs. 10.12 for crossbred cows to 13.90 and Rs.
13.57 for buffalo and local cows, respectively, which are higher than price paid by co-operatives for standard milk (fat-6%
and SNF-21%). Herd size and type of milch animal along with parity had significant influence on cost of milk production.
Production cost is likely to decrease with increase in size of unit and in production of crossbred cows in herd. More than
two-third of milk produced by co-operative members is marketed through dairy co-operatives in Bihar. The producers‟
share in consumer rupee is about 58% for all categories of herd since all are marketing their milk through co-operatives
only. Dairy farmers should also be advised for meeting the requirements of feed by providing desired nutrients through
feeding of green fodder which not only reduces intake of concentrates but also helps in reducing the cost of production.
Treatment of dry fodder with urea helps in improving its nutritive value, and such technologies may be popularized to
make feeding balanced and cost effective.
Meena G. L. & D. K. Jain (2012), study covered 75 cooperative member milk producers and 75 non-member milk
producers which were post-stratified into small, medium and large herd size categories. Per day net maintenance cost was
found to be higher for member group than that of non-member group. It was found to be higher in case of buffalo than that
of cow and also observed more
in the summer season. Per litre cost of buffalo and cow milk production was observed to be higher for the non-member as
compared to member group. Per litre cost of buffalo milk production decreased with increase in herd size categories
across different seasons while same trend was not observed in case of cow milk production. Further, it was found higher
in summer season. Daily net return was found relatively higher in member group as compared to non-member group and
also found higher in winter season. Overall average daily milk production, consumption and marketed surplus of milk were
found higher on the member group as compared to non-member group. The corresponding figures were recorded highest
in the winter season in both the member and non-member group.
Tanwar P. S. et.al.(2012), study was conducted to estimate the economics of milk production among different categories
of members and non-members families of dairy co-operatives based on personal interview method. An analysis of data
from 240 families (120 household under each category) revealed that overall gross maintenance cost per animal per year
was higher (Rs. 21532.81) in members families in comparison to non-members families (Rs. 19768.30). Maximum gross
maintenance cost was on small farmers and minimum was on landless farmers in both the categories. The share of
variable and fixed cost in total maintenance cost was (82.36% and 17.64%) in members families and almost same in case
of non-members families (82.95% and 17.05%). The cost of feed, fodder and concentrate was main component in gross
maintenance cost in both the categories. The overall cost per liter of milk was lower (Rs.10.47) in members families than
non-members families (Rs.11.29). The size of land holding showed negative relationship with cost of milk production.
Overall net return per animal per year was higher in members households in comparison to non-members households.
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Overall net profit per liter of milk was Rs. 4.73 for members households, while it was Rs. 2.01 on non-members
households. The overall average income per rupee of investment was higher (Rs.1.45) in members families than non-
members families (Rs. 1.18).
Research Methodology
District Etawah milk producers‟ cooperative union was purposively selected from state of Uttar Pradesh. Exhaustive lists of
all the milk producers‟ cooperative societies in Etawah district milk producer‟s cooperative union were prepared.
Researchers have selected randomly 150 non member of dairy cooperative society & 150 members of dairy cooperative
society from 10 Villages of 2 blocks selected in district Etawah. All the milk producing households members and non
members were classified into five categories, viz., Land less, Marginal, Small, Medium and Large farmers on the basis of
land holding capability. Thus in all, 300 households were interviewed during the year 2008-09. The primary data were
collected with help of well structured pre-tested schedule by personal enquiry method. The data collected were subjected
to tabular analysis in order to study the comparative economics of milk production. The net maintenance cost per milch
animal per day was divided by the respective average milk yield per milch animal per lactation to arrive at per litre cost of
milk production. Break –even analysis was employed to work our break even output for milch animals (cow and buffalo) on
different categories of households (MR = MC) i.e., marginal cost is equal to marginal revenue. The total milk produced by
the all milch animals in the household was reckoned as total milk production.
Cost of milk production (per litre) on different categories of milch animals (cow) per lactation
TABLE - 1
Total
cost 2700 2820 3000
(Rs.) 24900 27300 28800 29700 27900 24600 27000 29700 28800
0 0 0
Total
milk
producti
on 2199 2400 2298 2400 2499 2298 2799 2700 2499 2499 2799 2499
(litre)
Cost of
milk
producti 11.2 11.2 10.7
on/ litre 11.32 11.87 12.00 11.88 12.14 8.78 10.00 11.88 11.52
5 8 1
(Rs.)
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Cost of Milk Production (per litre) on different Categories of Milch Buffalo per Lactation
TABLE - 2
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Break-even
point (litre) 109.7 103.0 108.6 100.8 105.
98.46 111.94 116.88 106.38 94.73 86.37 108.43
5 9 9 9 26
Percentage
of BEP to 3.03 3.73 3.65 3.89 3.22 3.15 2.39 3.61 3.12 3.29 2.80 3.18
total out put
The overall average variable cost per liter of milk for member of dairy cooperative society was Rs. 8.45 while for non
members, it was Rs. 7.50. In members category the maximum variable cost per liter of milk was Rs 8.72 in medium
category and minimum Rs 6.58 in land less category. In other side (non member) category maximum value of variable
cost per liter of milk was Rs 9.30 (medium) and minimum value was Rs.7.86 in land less category.
The dairy cooperative society members have achieved their overall average breakeven point at 105.26 liter while the non
members of dairy cooperative society have achieved their overall average breakeven point at 94.73 liter. Thus, it is clear
that the milk yield per milch cow per lactation was higher than its break even output to cover the cost in both category of
member and non member of dairy cooperative society.
The overall average Break Even point per liter of milk for member of dairy cooperative society was 207.45 liter while for
non members, it was 257.17 liter. In members category the maximum BEP per liter of milk was 210.67 liter in land less
category and minimum 198.41 liter in marginal category. In other side (non member) category maximum value of BEP per
liter of milk was 349.65liter (small) and minimum value was 284.72 liter in land less category. Thus, it is clear that the milk
yield per milch buffalo per lactation was higher than its break even output to cover the cost in both category of member
and non member of dairy cooperative society.
Member
Non Member Over
Overall
all
Particulars Sma Averag
Avera
Landles Margin ll e Landles Margin Sma Mediu Larg
Medium Large ge
s al s al ll m e
Milk yield
per animal
(litre) 2700 2400 2100 2400 2700 2400 2400 2700 2700 2700 2700 2400
Fixed cost
per animal 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500
(Rs.)*
Variable
cost per 2880 3090 3210
26700 29100 30600 29400 28800 28500 31200 31800 30600
animal 0 0 0
(Rs.)
Tot
al cost per 3030 3240 3360
28200 30600 32100 30900 30300 30000 32700 33300 32100
animal 0 0 0
(Rs.)
Variable
cost per 13.7 11.4 11.8
9.88 12.12 12.75 10.88 11.86 11.87 11.55 11.77 11.70
litre of milk 1 4 8
(Rs.)
Price litre of
milk (Rs.) 18.0 19.0 19.0
18.00 18.00 18.00 18.00 18.00 19.00 19.00 19.00 19.00
0 0 0
Break-even
point (litre) 349. 198. 210. 207.4
184.72 255.10 285.71 210.67 257.17 210.37 210.34 207.46
65 41 67 5
Percentag
e of BEP 16.6
6.84 10.62 11.90 7.80 10.00 8.76 7.79 7.34 7.68 7.80 7.87
to total out 5
put
*(Fixed cost = Housing expenditure + Depreciation on milch cow + Depreciation on machinery + Interest on
animal value)
CONCLUSION
At last researcher find out through research that cost of milk production per liter of cow and buffalo per lactation was lower
in member families than non-member families. This reflect that the members of dairy cooperative societies not only kept
superior breed of cow and buffaloes but also followed better feeding and management practices than their counterpart
non-member families, which in turn, enhance their profit by way of higher productivity of buffaloes. In BEP analysis,
member of dairy cooperatives achieved Break Event Point earlier while non member reached on that level after some
more milk production in buffalo category. Finally, it is suggested that non-members should take the membership of dairy
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cooperatives, so that economic status of the milk producers can be improved. After joining dairy cooperatives non
members will be entitled to get better feeding management practices as well as credit facilities on low interest rate.
REFERENCES
[1] Badal, P.S. and Dhaka, J.P. 1998. An Analysis of Feeding Pattern and Cost of Milk Production in Gopalganj District of
Bihar. Indian J. Dairy Sci. 51(2):121-126.
[2] Bhardwaj, A., Dixit,V.B. and Sethi, R.K. 2006 . Economics of Buffalo Milk Production in Hisar District of Haryana State.
Indian J. Dairy Sci. 59(5):322-327.
[3] G. L Meena., Jain, D. K. 2012. Economics of Milk Production in Alwar District (Rajasthan): A Comparative Analysis,
International Journal of Scientific and Research Publications, Volume 2, Issue 8.
[4.] Singh,Krishna M. et.al.(2012), “An Economic Analysis of Milk Production in Bihar” Indian Journal of Animal Sciences,
82(10):1233-1237, October 2012
[5] Tanwar P. S. ,Yogendra Kumar, Sankhala Gopal. 2012. Economics of Milk Production Among Member and Non-
Member Families of Dairy Cooperatives in Jaipur (Rajasthan), Indian J. Dairy Sci. 65(5).
[6] Rao, B. D. & Singh C.B., “ Impact of operation flood program on the economics of buffalo milk production in Guntut
Dist. Of AP” Indian dairyman, 1995, 18(4) ; 47 -50.
[7] Sah, D, Jain D.K. & Sharma KNS, Impact of Dairy cooperative on marketing pattern of milk in bullandshahar, UP,
Indian dairyman, 1996, 48(6) ; 37 -41.
Ashish Chandra is currently working at Amity Business School, Amity University, U.P., Lucknow
Campus. He has also served at Advanta India Ltd. A hybrid seed marketing compy.
Mr. Ashish has more than 9 years of teaching and industry experience. He has completed his B.Sc in
Agreculture, MSc in Plant Pathology and MBA in Agri Business. He has also pursuing Ph.D from CSJM
University Kanpur. Mr. Chandra has published several Research papers in National and International
level
Dr. Sachin Kumar Srivastava is currently working at Amity Business School, Amity University, U.P,
Lucknow Campus. He has also served at Sahara Arts and Management Academy a Sahara India
Pariwar‟s Venture as Faculty Member and Coordinator MBA programme. He obtains his B.Sc. from
University of Lucknow and B.E. (Mechanical Engineering) from B. R. Ambedkar University Agra, MBA
from U. P. Technical University Lucknow and Ph. D. from University of Lucknow. Dr. Srivastava has
over Ten years of teaching experience in Management and Engineering and has published more than
10 research papers in International journals like Taylor & Francis Journals etc.
Dr. Srivastava is a member of different associations like International Association of Computer Science and Information
Technology, “IACSIT”, Professional Risk Managers' International Association, “PRMIA”. He is also reviewer of different
international journals like International Journal of Innovation, Management and Technology, “IJIMT”, “Suraksha
paridrishya”, etc. He was also associated with different international conference as a Programme Committee member like
“CSNT 2011”, MIRA 2013, ACMC 2012 & Fostering Entrepreneurship Theory & Practice 2012 etc. He is a member of
Publishing Core Committee of Amity Business Journal (ABJ).
He is the author of several books like Supply Chain Management, International Business Environment and Foreign
Exchange Management etc. his area for interest are Sales Management, Sales & Distribution Management, General
Management, Supply Chain Management etc.
.
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