Abstract:
The success of Dairy farming, as a form of business, depends on profitable milk
production and marketing. The price of milk depends on various factors such as
demand, supply, cost of production, location of the area and marketing channel.
Profit margin in the dairy industry has been considered to rest on the difference
between the cost of production per liter of milk and the average farm gate price for
milk. The objective of this study was to identify the factors affecting the cost of milk
production in Ratnapura District and suggest a reasonable and appropriate price for
a liter of milk produced by dairy farmers in the district considering the cost of
production of milk.
A field survey was conducted using a pre-tested questionnaire on the cost of milk
production in the area. Two hundred and fifty dairy farmers were selected from the
district for the study by using simple random sampling method.
The highest amount of cost has been spent for labour. It was estimated to be 44.1% of
the total cost while 41.7% of the total cost represents the feeding cost. The rest of the
cost is due to other operational costs, like cost of depreciation of initial investment
(3.1%), cost of veterinary services (3.2 %), cost of building repairs (0.6%), cost of
death and losses (4.9 %) and breeding & miscellaneous costs (2.4 %). The costs of
production of a liter of milk by an average farmer, when his family labour costs are
included and excluded were Rs. 25.50 and Rs. 14.60 respectively. The average price
paid to all farmers surveyed was Rs. 28.75 per liter of milk. It greatly varies with fat
content of the milk. Average herd size of the area was four animals per farm.
Average milking cows per farm were 2.8.It is recommended to have a minimum price
of Rs.30 per liter of milk to make dairying a fairly profitable for farmers in the area.
