An Estimation of Cost of Milk Production in Pakistan: a Microeconomic Approach

There is prevalent role of livestock in rural economy of Pakistan as is known from the fact that 30-35 million populations is raising an average holding of 2-3 cattle/buffalo and 3-4 sheep/goat per household with a contribution of 35-40 percent in their income. The study aimed at finding out the net profit scenarios for livestock and their products. The final product of this research endeavor is to draw policy lessons that can help refining the imbalances and distortions in the milk market. It was conducted in Jhang district for estimation of economics of livestock production and by using random sampling techniques 100 respondents were selected. Data was collected on size of farmer land, livestock strength, status of milk animals, sale and purchase during the year, labor cost, value of shed, health cover, concentrate cost, veterinary cost and miscellaneous production cost. Multiple regression and Cobb-Douglas production function were estimated by using Ordinary Least Squares (OLS) method. It was concluded that average fixed cost per animal was 14.8, 8.22 and 4.4 of large, medium and small farmer per month. The fixed cost was Rs. 4973.95, Rs. 2905.54 and Rs. 1536.42 and variable cost were Rs. 14263.11, Rs. 8311.83 and Rs. 3653.46 for large, medium and small farmers per month. The average milk yield per day was 7.99, 7.20 and 6.73 litter. The cost of milk production per litter was Rs. 8.37, Rs. 9.50 and Rs. 8.56 for large, medium and small farmers. The econometrics result showed that livestock production is depicting“ increasing return to scale” in the study area. An incentive policy focus in the sector would help alleviating poverty at a large scale in rural areas of Pakistan.