Dairy Farming In Kenya; A Comprehensive Cost Of Production Guide

Since 1990, the number of smallholder farmers producing milk has increased by 300 percent. Today, Kenya’s dairy sub-sector ranks among the largest in sub-Saharan Africa. The national herd size is approximately 3.5 million. The sub-sector accounts for about 3.5% of the National gross domestic product (GDP) and contributes to the livelihoods of about four million Kenyans through food, income and employment. Several factors, which include the presence of significant dairy cattle populations, the historical importance of milk in the diets of most Kenyan communities and a suitable climate for dairy cattle have contributed to the successful dairy farming in Kenya

The dairy subsector has potential to improve the livelihoods of the majority smallholder family farmers and realize transformation from subsistence farming to a competitive, commercial and sustainable dairy industry for economic growth and wealth creation.

Measuring the cost of production is important if a farmer wants to know whether or not he is making profit. While one can tell the milk price right away, it is often difficult to measure milk production costs and profits.

The cost of milk production and its profitability is also affected by factors that determine farm-gate milk prices across the rural areas of Kenya. The choice of production and marketing strategies by farmers therefore, contribute to high costs of production and low average productivity. As a result there has been continued interest from the public and from policy makers in the profitability and competitiveness of Kenya dairy production. Therefore, an understanding of the costs and benefits of smallholder dairy farmers is an important pre-requisite for policy formulations aimed at improving productivity levels.

What you need to know before starting dairy farming in Kenya

For beginners who wish to venture into dairy farming, it’s crucial to consider the feed for the animals as the first step. Begin with fodder, then structures, buy equipment, get workers, and then the cows can come to a farm that is already set up.

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? For a long-term vision, the farm may outlive the person who started it and will require a succession plan. But if nobody is interested in the business, then it can be done 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. Good quality or top-tier Friesian cows are pricy and can go up to KSh. 600,000 per heifer. 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. 300,000 and KSh. 450,000. 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.

Second-tier dairy cows cost between KSh. 180,000 and KSh. 250,000. These are cows bought from farmers whose cattle look good in terms of size, they do not show signs of stunted growth, but lack proper documentation, and the parentage cannot be confirmed.

However, there are farmers who sell good Friesian cows below KSh. 180,000, and it is often because they have a cash flow problem that they need to solve.

Third-tier heifers are those sold among small-scale farmers and go from as low as KSh. 80,000 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 parlor, farm machinery and equipment, and workers.

Depending on which materials will be used for construction of the cow shed – wood or 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. But we have barns that have gone up to about KSh. 200,000 per cow space.

Cow feeds also form a major part of the capital whether grown by the farmer or bought.

Workers and equipment are also part of the estimate, with machinery like milking machines costing about KSh. 50,000 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.

Traits influencing dairy farming revenue and costs

Production, management, nutritional and economic variables used in the model for the low, medium and high dairy cattle production systems.

Variables                                                                                                           Production system

Economic variables (in Kenya shillings) used in the model for the low, medium and high dairy cattle production systems.

Variables                                                                                                           Production system

the number of calves for replacement or sale in the productive lifetime of a cow. Cow survival is of economic importance in the tropics where diseases and mortality rate are constraints. The live eight of animals has a significant effect on feed requirements. Currently, cows under the Dairy Recording Services of Kenya are performance recorded largely for milk yield, fat yield, age at first calving and calving interval traits.

Estimated returns from dairy farming in Kenya

Returns from dairy farming in Kenya can vary widely depending on several factors, including the scale of the operation, management practices, and market conditions. Here, we’ll provide a rough estimate of potential returns based on various scenarios. Please note that these are approximate figures, and actual returns may differ:

Small-Scale Dairy Farm:

• If you have a small-scale dairy farm with 5 to 10 dairy cows, you can expect annual returns of around Ksh. 500,000 to Ksh. 1,000,000 from milk sales alone.
• Additional income can be generated from the sale of calves, which can fetch around Ksh. 10,000 to Ksh. 20,000 each, depending on their quality.
• Total returns, including milk sales and calf sales, may range from Ksh. 600,000 to Ksh. 1,200,000 annually.

Medium-Scale Dairy Farm:

• For a medium-scale dairy farm with 20 to 50 cows, annual returns from milk sales can range from Ksh. 2,000,000 to Ksh. 5,000,000 or more.
• Income from the sale of calves and other dairy products (e.g., yogurt, cheese) can further boost returns.
• Total annual returns for a medium-scale dairy farm may be in the range of Ksh. 2,500,000 to Ksh. 6,000,000 or higher, depending on various factors.

Large-Scale Dairy Farm:

• Large-scale dairy farms with over 100 cows have the potential for substantial returns. Annual milk sales alone can generate millions of Kenyan shillings, ranging from Ksh. 10,000,000 to Ksh. 20,000,000 or more.
• Income diversification through value-added dairy products, such as ice cream or butter, can contribute significantly to returns.
• Large-scale dairy farms may achieve total annual returns exceeding Ksh. 15,000,000 to Ksh. 30,000,000 or higher.

It’s essential to consider that returns from dairy farming are influenced by factors such as milk yield per cow, milk prices, feed costs, veterinary expenses, and market demand. Efficient management practices, including proper nutrition, disease control, and breeding, play a crucial role in maximizing returns.

Additionally, market fluctuations and external factors, such as weather conditions and disease outbreaks, can impact profitability. Farmers should also factor in initial capital investments and ongoing operational expenses when assessing potential returns from dairy farming.

Before starting a dairy farming venture, it’s advisable to conduct a comprehensive feasibility study and develop a detailed business plan to better estimate potential returns based on your specific circumstances and goals.