Cost of Production and Competitiveness for Production of Milk in Nepal

Nepal is a developing country located in South Asia with high economic dependency on agriculture. Eighty percent of the population works in the agricultural sector, generating 40% of the GDP. Livestock is an important part of mixed farming with dairy generating about two-thirds of the livestock GDP. Almost three-fourths of the households in Nepal keep cattle and one-half keep buffalo for milk production. Even with a larger percentage of the animals being cattle, buffalo produced 71% of the milk. Cost of production is higher for cattle because cattle productivity declines after 5 to 6 lactations but must be kept in the herd because cattle cannot be slaughtered because of religious based policy. This makes milk production cost higher and reduces the competitiveness of milk in south Asia. The no slaughter policy puts Nepal at a disadvantage to other growers in south Asia. The purpose of this study was to assess the cost of production for producing milk and the impact of no slaughter policies on producers. Monte Carlo simulations were completed to quantify a baseline and alternative scenarios for milk production. Our results suggest that milk production would increase significantly allowing domestic consumption and trade to increase as well.