Abstract
Dairying is an important component of Pakistan’s mixed crop-livestock farming systems. The national economy engages some 8.8 million small-scale producer households. The country produces more milk than any other except for the United States and India. Yet little is known about small-scale producer microeconomics to inform policy development for improving their welfare. In this paper we aim to identify the whole farm profitability of small agricultural households, with a specific focus on milk production. We compare two contrasting agro-ecological regions within Pakistan’s Punjab (irrigated Okara and rain-fed Bhakkar) using results for a single 2008-09 fiscal year of production for 212 farms.
Net farm profits, taking long-run opportunity costs of labour and capital into account, showed only 10 percent of these farms to be profitable in either district, though short-run profits, accounting for cash costs only, showed positive whole farm gross margins for 90 percent and 80 percent of farms in Okara and Bhakkar, respectively. The returns on assets (at 2.78 percent and 0.53 percent for the two districts) was lower than the national average return on savings (9 percent). For dairy enterprises, total costs were higher than incomes; so many farms (70 percent and 60 percent, respectively) were assessed as making losses. Given the low opportunity costs of feeds (often crop residues) and of labour (6.2 percent unemployment) and the high rate of inflation (11.8 percent), returns on factors of production including labour and capital, may not be lower than international standards. There is a need, however, to raise the dairy industry’s overall productivity to make dairying viable; and to identify an optimal land and livestock combination that is profitable and commercially viable.
Net farm profits, taking long-run opportunity costs of labour and capital into account, showed only 10 percent of these farms to be profitable in either district, though short-run profits, accounting for cash costs only, showed positive whole farm gross margins for 90 percent and 80 percent of farms in Okara and Bhakkar, respectively. The returns on assets (at 2.78 percent and 0.53 percent for the two districts) was lower than the national average return on savings (9 percent). For dairy enterprises, total costs were higher than incomes; so many farms (70 percent and 60 percent, respectively) were assessed as making losses. Given the low opportunity costs of feeds (often crop residues) and of labour (6.2 percent unemployment) and the high rate of inflation (11.8 percent), returns on factors of production including labour and capital, may not be lower than international standards. There is a need, however, to raise the dairy industry’s overall productivity to make dairying viable; and to identify an optimal land and livestock combination that is profitable and commercially viable.
| Original language | English |
|---|---|
| Article number | G |
| Pages (from-to) | 1-18 |
| Number of pages | 18 |
| Journal | AFBM Journal |
| Volume | 15 |
| Issue number | Paper G |
| Publication status | Published - 2018 |
