Economic analysis of the viability of smallholder dairy farming in Zambia

C Mumba, K L Samui, G S Pandey, B M Hang’ombe, M Simuunza, G Tembo* and S W Muliokela**

University Of Zambia, School of Veterinary Medicine, P.O. Box 32379, Lusaka, Zambia.
cmumba@unza.zm   and   sulemumba@yahoo.com
* University Of Zambia, School of Agricultural Sciences, P.O. Box 32379, Lusaka, Zambia.
** Golden Valley Agricultural Research Trust, P.O. Box 50834, Lusaka, Zambia.

Abstract

A cross sectional study was carried out to assess the viability of smallholder dairy farming in six provinces of Zambia. Data used to achieve this objective were obtained from 157 smallholder dairy households using a questionnaire and review of secondary sources of data.

These results showed that the average price of milk received by the farmer was ZMK 2002.05 (USD 0.43) per litre. The average cost of production was at ZMK 828.20 (USD 0.18) per litre, representing 42.1% of the price received. The returns per litre were at ZMK 1173.85 (USD 0.25), representing 57.9% of the average price of milk. These results suggest that smallholder dairy farming is viable in Zambia and plays a major role in rural development and poverty reduction. Western Province recorded the highest profit, however, one way analysis of variance (ANOVA) showed that there was no significant difference (P<0.05) in arithmetic means of unit profit in all the six provinces studied. There was a significant difference (P<0.05) in arithmetic means of the cost of production in Lusaka and Western Provinces only. These estimates are important in issues relating to farm-level decision-making, policy and government program analysis, performance analysis, and resource allocation to smallholder dairy farming.

Keywords: Cost of production, dairy enterprise, gross margin, profitability

Introduction

Zambia has a population of 13,046,508 people with 61% of the population residing in rural areas (CSO 2010). Agriculture is their main source of livelihood. Smallholder dairy farming in Zambia can play an important role in poverty reduction, employment opportunities, wealth creation and nutritional household food security of the majority of the rural populations living below the poverty datum line. Smallholder dairy production is a farming system that promotes regular monetary earnings to people who normally access cash once a season after the sole harvested crops (Ngongoni et al 2006). The regular monthly monetary earnings from the sale of milk and milk products have favorable effects on the cash flow charts of rural households and improve the lifestyles of the rural populace.

 Zambia has about 2500 smallholder dairy farmers affiliated to dairy cooperatives in milk marketing whose capacities in smallholder dairying are being strengthened by resource persons, including materials and financial support mainly from Golden Valley Agricultural Research Trust (GART) and non governmental organizations (NGOs) in collaboration with the Government of Zambia (Pandey and Muliokela 2006). The total milk production in Zambia is estimated to be over 215 million litres per year and about 115 million litres (53.5%) is the estimated share from smallholder dairy farmers including traditional (beef) cattle keepers (Pandey 2010). The per capita milk consumption in Zambia is estimated to be 24 litres per person per year against the recommended level by FAO which is about 200 litres (Pandey 2010). Average per capita consumption of milk in sub-Saharan Africa is about 36 litres with Kenya being the highest at about 100 litres (Thorpe et al 2000).

 Smallholder milk production not only improves the global food security of milk-producing households but also helps to create numerous employment opportunities throughout the dairy chain. The dairy sector provides income as well as direct and indirect employment to many, often poor, people. It is estimated that 12 to 14% of the world population, or 750 to 900 million people live on dairy farms or within dairy farming households and production of 1 million litres of milk per year on small-scale dairy farms creates approximately 200 on-farm jobs (FAO 2010).

There is lack of research based information on the profitability of smallholder dairy farming in Zambia. The primary objective of this study was to assess the cost of production and profitability of smallholder dairy farming in Zambia. Measuring the cost of production is important if a farmer wants to know whether or not he is making profit (Mburu et al 2007). The findings of this study are therefore cardinal for policy makers, development planners and farmers when making decisions related to costs and benefits to smallholder dairy enterprise and in issues relating to farm level decision-making, policy and government program analysis, performance analysis, and resource allocation.

 Material and methods

Study sites included Central, Copperbelt, Southern, Eastern, Western and Lusaka provinces of Zambia. A purposive multi-stage using probability proportion to size sampling design was employed in this study. In the first stage, the country was stratified into nine (9) strata (provinces) on the basis of geographical demarcations. In the second stage, six out of the nine provinces were selected. In the third stage, twelve administrative districts were selected from the six provinces. In the fourth stage, a list of smallholder dairy farmers was developed by first going through the records from respective milk collection centers (MCCs) in these twelve administrative districts. In the final stage, 7% of the farmers were further randomly selected from the constructed list and were interviewed on farms. In total, 157 smallholder dairy households were interviewed across the provinces. Primary data were collected through personal interviews using a survey questionnaire as described by Osotimehin et al (2006). Secondary data were collected from milk collection centers using document reviews as described by Weiss (1998).

Statistical Package for Social Scientists (SPSS) was used for descriptive statistics. Gross margin analysis was used to estimate the cost and returns of smallholder dairy enterprise. Only variable inputs/costs were included in gross margin analysis. Fixed costs were ignored since they were unrelated to higher levels of milk production and do not affect the optimal combination of the variable inputs (Mburu et al 2007). No attempts were made to quantify the non-marketed goods and services to the smallholder dairy enterprises in this analysis.

Results

Socio-economic characteristics of respondents

About 36.9% and 63.1% of the interviewees were females and males, respectively. The majority of the respondents (82.2%) were married, 5.1% single, 12.1% widowed and 0.6 % declined to state their marital status.  Data on family size, herd size, supplements, milk production and milk consumed at home are presented in Table 1. The average family size per household was 9.96 (Table 1). The minimum number of family members was one and the maximum was 32 members. Family size has been asserted as the most important determinant of labour investment for family farms (Ngongoni et al 2006). According to Ngongoni et al (2006), household size is considered important because in addition to being a source of labour, the size of the family also influences the need for increased milk production for home consumption as well as for the market.

 The average herd size of dairy animals was 4.37 per household. The animals were fed an average of 3.23 kg of concentrates as supplementary feed per cow per day during and after milking as none of the farmers practised zero grazing. On average each farmer delivered 15.4 litres of milk/day to the MCCs during the dry season and 27.7 litres in the rainy/wet season. This shows that milk production in Zambia reduces by 44% during the dry season due to shortages of feed and water for animals. Most of the farmers do not conserve grass in form of hay as the fields are normally burnt or become dry and overgrazed during the dry season. An average of 2.20 litres of milk was consumed by each household per day (Table 1).

 Distance (one way) travelled to deliver milk to milk collection centers

Distance to MCCs is a very important factor on smallholder dairy production. According to Table 2, 17.2% of the respondents lived at distances less than 1 km from MCCs, 43.9% between 1-5 km, with 25.5% between 5-10 km, 12.1% between 10-20 km and 1.3% over 20 km.

 Mode of transport used to deliver milk to milk collection centers

The majority (68.2%) of the smallholder dairy farmers used bicycles as the main mode of transport to deliver milk to the MCCs, with 26.8% delivering milk on foot. Some farmers used motorbikes (3.8%), ox carts (0.6%) and wheelbarrows (0.6%) (Table 3). 

 Cost and returns (gross margins)

The average price of milk received by the farmer was ZMK 2002.05 (USD 0.43) per litre. The average cost of production was ZMK 828.20 (USD 0.18) per litre, representing 42.1% of the price. The returns per litre were at ZMK 1173.85 (USD 0.25), representing 57.9% of the average price of milk. Table 4 depicts the average sale price of milk, costs of production and profits. 

Cost of production and profit expressed as a percentage

The cost of production and profit per litre varied in the surveyed provinces of Zambia. The percentage of the cost of production was less than that of the profit in all the surveyed districts. This indicates a positive gross margin meaning that smallholder dairy farming is viable in all the districts. Senanga district recorded the highest profit per litre, followed by Mongu, Batoka, Choma, Chibombo, Chipata, Luanshya, Monze, Kalomo, Mazabuka, Kabwe and Kafue (Figure 1). However, one-way analysis of variance indicated that there was a significant difference (P<0.05) in the cost of production between Lusaka and Western Provinces only. There was no significant difference in arithmetic means of unit profits in all the studied provinces.

Figure 1: Cost and returns expressed as a percentage

Discussion

 Cost of production

The costs of production are expected to be highest in the most intensive systems and lowest in most extensive systems reflecting the high amounts of concentrate feeds used (Mburu et al 2007). This assumption was correct in the present study as a one-way analysis of variance showed that there were significant differences (P<0.05) between the arithmetic means of the costs of production for Lusaka and Western Provinces of Zambia. The cost of production was lowest in Senanga (20.2%) and Mongu (33.1%) districts in the Western Province; this was because the cost of labour, feeding, vaccination and dipping animals was minimal. The respondents indicated that the use of acaricides for dipping or spraying animals against ticks is not practised in the Western Province because the ticks are eradicated by the floods in the Zambezi flood plain every year hence very minimal or no costs towards dipping. There were no costs on vaccination because all the vaccinations against major diseases in the Western Province i.e. contagious bovine pleural pneumonia (CBPP), anthrax, blackleg, etc. are carried out by the government through the district veterinary offices. Rice polish and maize bran is the only supplementary feed that a few farmers give their animals when they are in the uplands. The animals are kept in the Zambezi flood plain which is evergreen for about 6 to 8 months of the year and they are only moved to the upland when the flood plain gets flooded in rainy season. The animals owned by several people are kept in herds of 30–100 heads and during the daytime the animals graze under the control of a herdsman and at night they are kept in enclosures (kraals). These kraals are shifted frequently to spread the manure over a wide area that will be used to grow maize and millet (Moll et al 2007). Some respondents reported that they used manure as payment for hired labour. Manure is a non-market benefit of smallholder dairy enterprise (Staal et al 2003). However, previous studies in Kenya highlands estimated that the value of manure may be some 30% of the value of milk sold (Lekasi et al 1998; Ouma et al 2004).

 Lusaka Province recorded the highest cost of milk production per litre. This is because of the intensive systems being practised involving high use of large amounts of concentrates. This is in agreement with Baltenweck et al (1998) who reported that the cost of production to dairy enterprise is dependent on level of intensification, with less-intensified districts having relatively high levels of cash flows while some areas that are highly intensified experience rather low levels of cash flows. Farmers in urban areas such as Lusaka have smaller families compared to rural areas; therefore the cost of labour is also higher than in rural areas. Land in Lusaka Province is a limiting factor due to the population pressure leading to high level intensification in dairy farming.

 Conclusions and recommendations

• These results demonstrate that smallholder dairy farming is viable in Zambia as can be seen from the positive gross margins.

  
  

• The average price received by the farmer was at ZMK 2002.05 (USD 0.43) per litre while the average cost of production was at ZMK 828.20 (USD 0.18) per litre and the profit at ZMK 1173.85 (USD 0.25) per litre.

  
  

• Smallholder dairying in Zambia plays an important role in poverty reduction, employment opportunities, wealth creation and nutritional household food security. Therefore, Government, donors and other service providers need to allocate more resources towards holistic smallholder dairy development particularly in the areas of marketing, value addition, infrastructure development, knowledge transfer and animal breeding.

 Acknowledgements

 We are grateful to Golden Valley Agricultural Research Trust, University of Zambia and Zambia National Zakah and Welfare Trust for financial and logistical support towards this research work.

References

Baltenweck I, Staal S J, Owango M, Muriuki H, Lukuyu B, Gichungu G, Kenyanjui M, Njubi D, Tanner J and Thorpe W 1998 Intensification of dairying in the greater Nairobi milk-shed: Spatial and household analysis. Paper presented at the workshop on urban markets and dairy development in sub-saharan Africa, Montpellier, France, 9-10 Sept. 1998 http://www.smallholderdairy.org/farming%20systems.htm.

 CSO 2010 (Central Statistical Office) 2010 Census of population and housing preliminary report. http://www.zamstats.gov.zm.

 FAO (Food and Agriculture Organization of the United Nations) 2010 Status of and prospects for smallholder milk production: A global perspective, edited by Hemme T and Otte T.  http://www.fao.org/docrep/012/i1522e/i1522e0.

 Lekasi J K, Kimani S K, Harris P J C and Tanner J 1998 Manure management in Kenya highlands: Practices and potential. Natural Resources Systems Programme, Department of International Development (DFID), UK, and Henry Doubleday Research Association, Emerson Press, Farmers word Road, Kenilworth, UK.

Mburu L M, Gitu K W and Wakhungu J W 2007 A cost-benefit analysis of smallholder dairy cattle enterprises in different agro-ecological zones in Kenya highlands. Livestock Research for Rural Development, Volume 19, Article # 7, July 2007. http://www.lrrd.org/lrrd19/7/mbur19095.htm.

 Moll-Henk A J, Staal S J and Ibrahim M N M 2007 Smallholder dairy production and markets: A comparison of production systems in Zambia, Kenya and Sri Lanka. Agricultural Systems. Volume 94, pp 593–603.

 Ngongoni N T, Mapiye C, Mwale M and Mupeta B 2006 Factors affecting milk production in the smallholder dairy sector of Zimbabwe: Livestock Research for Rural Development. Volume 18, Article # 5, May 2006. http://lrrd.cipav.org.co/lrrd18/5/cont1805.htm.

 Osotimehin K O, Tijani A A and Olukomogbon E O 2006 An economic analysis of small scale dairy milk processing in Kogi state, Nigeria. Livestock Research for Rural Development, Volume 18, Article # 11, November 2006. http://www.lrrd.org/lrrd18/11/osot18157.htm.

 Ouma E A, Obare G A and Staal S J 2004 The socio-economic dimensions of smallholder livestock management in Kenya and its effects on competitiveness of crop-livestock systems. Paper contributed to the conference on “Integrated Agricultural Research for Development-Achievements, Lessons Learnt and Best Practice” Held On 1-4th September, Kampala, Uganda.  http://www.smallholderdairy.org/publications.

Pandey G S 2010 Smallholder dairy farming offers wealth. Tuesday Zambia daily mail. November 16th, pp 8.

 Pandey G S and Muliokela S W 2006 Smallholder dairy farming: A tool for HIV/AIDS mitigation and food in-security: Africa forum 2006. The dual epidemics of HIV/AIDS and food insecurity, 9th May, Pamodzi Hotel, Lusaka, Zambia. http://www.projectconcern.net/forum/documents/Smallholder_Dairy_Farming-Pandey.pdf.

 Staal S J, Waithaka M, Njoroge L, Mwangi D M, Njubi D and Wokabi A 2003 Costs of milk production in Kenya: Estimates from Kiambu, Nakuru and Nyandarua Districts. SDP Research and Development Report No.1, pp 30. http://www.smallholderdairy.org/publications.

 Thorpe W, Muriuki H G, Omore A, Owango M O and Staal S 2000 Development of smallholder dairying in eastern Africa with particular reference to Kenya. Paper prepared for the UZ/RVAU/DIAS/DANIDA-ENRECA Project review workshop, 10-13 January 2000, Bronte Hotel, and Harare, Zimbabwe.  http://www.smallholderdairy.org/publications.

 Weiss C 1998 Evaluation: Methods for studying programmes and policies, pp 260. New Jersey, Prentice Hall.

Received 11 April 2011; Accepted 26 May 2011; Published 19 June 2011

Go to top