Milk your profits: The business of dairy farming

Dairy farming is one of the largest contributors to food and nutrition security, as well as a source of livelihood, in Kenya. According to the KNBS Economic Survey 2020, dairy farming contributed to the agricultural sector’s improved performance. The quantity of milk delivered to processors increased by 5.3 per cent from 634.3 million litres in 2018 to 668.2 million litres in 2019.

As a significant activity in the livestock sector, dairy farming is a thriving business venture, albeit one that is capital-intensive.  From the cows and calves, to land, fodder, labour and machinery needed to operate the farm, it’s a considerable investment.

So, what do you need to know before you get into this business, and how much does it cost?

Fodder comes first, not cows

David Maina, an expert consultant in dairy investments and Head of Business-Dairy Production Investments at Perfometer, a dairy advisory company, states that if well-managed, dairy farming is economically viable.

For beginners who wish to venture into dairy farming, David says the first thing to consider is the feed for the animals.

“Lack of know-how has led to the collapse of dairy farms. The common mistake I see people make is that they begin by building a cow shed, bring in the cows, and then start thinking about where the feed is going to come from. That is wrong. You should begin with fodder, then structures, buy equipment, get workers, then the cows can come to a farm that is already set up,” he says.

The second thing to consider is the vision for the dairy farm; who will run the farm, and how interested is your family in the business?

David says that for a long-term vision, in most cases, the farm may outlive the person who started it and will require a succession plan. However, if nobody is interested in the business, it can be handled in the short term because no one will be available to take care of it.

Cost of dairy cows

In Kenya, the most popular dairy breed is Friesian, but Ayrshire, Jersey and even Boran are also common breeds.

For dairy farming, the most recommended stage to buy a cow is when it is a calf. High-quality or top-tier Friesian cows are expensive and can cost up to KSh. 400,000 per heifer, David says. However, this is if the farm the calf is coming from has impeccable documentation, a good reputation, and the mothers have high milk production.

“The top range breeds we have in Kenya cost between KSh. 330,000 and KSh. 350,000. In most cases, these are cows that were imported as calves, or imported directly as pregnant heifers from Europe, South Africa or from other dairy developed economies,” says David.

Second-tier dairy cows cost between KSh. 180,000 and KSh250,000. These are cows purchased from farmers whose cattle appear to be of good size; they did not exhibit signs of stunted growth, but lack proper documentation, and the parentage cannot be confirmed.

However, some farmers sell good Friesian cows for less than KSh. 180,000, and the dairy investment consultant says that in most cases, it is because they have a cash flow problem that needs to be solved.

Third-tier heifers are those sold among small-scale farmers and go from as low as KSh. 90,000 to KSh. 120,000.

Heifers in all the tiers are sold while pregnant.

Capital estimation

Some of the major components included in the capital estimation of a dairy farm are: the cow shed, feeds, milking parlour, farm machinery and equipment, and workers.

Depending on the materials used for the cow shed’s construction – wood, metal, or a combination of both – the cost will vary.

“The cow shed can be a mix of both wood and metal, or just wood, which brings the cost significantly down. But perhaps the lowest you can get to is about KSh. 40,000 per cow space. However, we have barns that have been built up to about KSh. 200,000 per cow space,” David says.

He continues: “When I say per cow space, I mean the total cost of the barn divided by the number of cows it was designed to hold. So, if I were designing a barn for 100 cows and it has cost me KSh. 2 million, then you divide KSh2 million by 100 animals.”

Cow feed also forms a major part of the capital, whether grown by the farmer or purchased.

Workers and equipment are also factored into the estimate, with machinery such as milking machines costing approximately KSh50,000 for a single electric milking machine.

“A milking parlour, for example, a semi-automatic one, could cost up to KSh. 6 million. It’s not cheap.

“Then you also have to factor in things like power and a backup generator, freezers, coolers, pasteurizer and so on. All the costs must be foreseen so that you don’t have to start thinking about them when you have already begun your dairy farm operation,” David says.

Pests and disease control

Dairy cows are affected by a range of diseases which may compromise their productivity and profitability.

Samson Muthoni, farm manager at Risa Farm, says it is essential to have a protocol for treating diseases.

“It’s important to know when the disease was noticed. There are diseases that we need to take samples to a lab in order to analyse the sensitivity of certain medicines. So, from there, that’s when we embark on treatment. The cost can be quite high for some diseases, but generally treatment is relatively affordable,” Samson says.