'Mid-scale dairy farms to be key growth drivers for sector'

Medium-scale dairy farms, having around 50 to 300 cattle, will be one of the key growth drivers for the domestic dairy sector, while milk procurement is likely to become the critical link in the supply chain, a report said.

"In the coming years, milk procurement will become the single-most critical link in the dairy supply chain. As procurement from small and marginal dairy farmers will increasingly become a challenge for milk processors, the industry will see the emergence of farmer-owned dairy farms, with herd sizes ranging from 50 to 300 cattle," according to a Rabobank report.

This will be more pronounced in some states, including Andhra Pradesh, Punjab, Haryana and Maharashtra, and will happen at a snail's pace in others like Madhya Pradesh, Uttar Pradesh and Bihar.

Even as the share of milk procured from small or marginal farmers will decline, this segment will still stay relevant, the report said.

Direct milk sourcing is increasing in order to improve control over supply, with more capital being invested in connecting directly to the farmers.

This is mainly to set up village collection points and bulk chilling centres, which ensure consistent supply of milk throughout the year, it added.

Currently, private dairy companies procure roughly 65-70 per cent of raw milk from agents, with the rest coming directly from farmers.

About 75-80 per cent of milk in the country now is procured from small and marginal farmers, who own up to two hectares of land and 2-3 cattle, producing a total of around five litres of milk a day.

The farmers use family labour for milking, which is not accounted for in the cost of production, it said.

This is expected to reverse by 2025, with direct farm sourcing contributing 60 per cent or more of the milk procured by these companies.

For many farmers, dairy is still secondary to arable cropping as a source of income.

The share of milk procured from these farmers has been shrinking and it will continue to do so in the coming 10 years to about 50-60 per cent by 2025, the report said.