Dairy Development Programs in Andhra Pradesh, India: Impacts and Risks for Small-scale Dairy Farms


This study served two purposes; firstly, to gain insight into the household and farm economics of small-scale dairy farmers in Andhra Pradesh, India, and to obtain estimates of their costs per unit of output in milk production and secondly, to explore the potential impact of dairy development interventions on household incomes, returns to labour and costs of milk production.

The study applies a method of economic analysis developed by the International Farm Comparison Network (IFCN), which is based on the concept of 'typical farms', to assess the potentials of dairy development in the Indian state of Andhra Pradesh. The state was divided into two zones with distinct levels of milk production densities: a high and a low density milk production areas. Three broad farm types were selected to represent typical farms from each of these regions: landless farming systems with 1 local cow or buffalo, small farmers with 2 to 3 buffaloes and commercial farms with 11 to 14 cows or buffaloes. Farms with 2 to 3 dairy animals and 1 to 2 ha land represent the most common farm type found in the state. Each farm is described in detail with assets, production costs, profits and other economic information presented both graphically and in the text.

The farm-level impact of over 40 potential dairy development interventions covering feeding, breeding, animal health and milk marketing on a typical 3-buffalo farm was assessed through an iterative process that combined detailed household and farm simulation with expert and farmers' opinions and feedback.

Given that resource-poor farmers are, by necessity, risk avoiders, dairy development programs must simultaneously improve the financial performance as well as the risk profile of the targeted farms. However, few dairy development programs are conceived to comprehensively address a wide range of factors, which may explain the reluctance of smallholder dairy farmers to participate. Therefore, the authors propose that existing programs need to partner and build on each other and show that complementary programs can effectively lift small dairy producers out of poverty through a competitive dairy farming business, which provides not only an excellent wage level under local conditions, but which is also well-positioned against international competition in a global economy.

An eight page executive summary is also available in addition to this paper.


PPLPI, FAO, Rome, Italy, iii+73 pp.

Published 1 January 2007