Market-Oriented Dairy Project develops financially viable models for medium-scale dairy farms

• USDA’s ‘Food for Progress’ initiative fosters dairy as business to improve productivity

Completing nearly six years of on-the-ground interventions, the USDA Food for Progress funded Market-Oriented Dairy Project (MOD) implemented by Improving Economies for Stronger Communities (IESC) has developed the capacities of over 11,000 mid-sized dairy farmers to approach dairy as a business to facilitate increases in farm productivity and milk yields. 

 In addition to empowering farmers and fostering entrepreneurship, MOD’s market-driven approach has enabled public/private collaboration to facilitate investment, strengthened buyer-seller relationships, improved local extension services, and built local trade association capacity to deliver sustainable locally-led solutions.

At a seminar held recently, the MOD project shared the financial viability and profitability of production models promoted by MOD based on farm output levels (i.e., 45 to 100-plus litres of milk per day). Working closely with the Department of Animal Production and Health (DAPH) at the central and provincial levels and the dairy processing companies, MOD also shared the gaps to be addressed to assure the sustainability of these models whilst continuing to explore avenues of more cost-effective methods to improve profit margins.

MOD carried out an analysis of the financial viability of the promoted production models to understand the threshold levels required to be resilient and absorb external shocks. The analysis found that more progressive farmers adopting a higher number of best practices, especially in improving feed availability, weathered the recent volatile economic conditions relatively well. The analysis also found that there were significant variations between the up-country and the low-country regions, related to the availability of resources and farm management practices reflecting that separate production models are necessary to fit the different contexts. 

Amongst the participants at this important seminar were senior officials from the Ministry of Agriculture – Livestock Division, DAPH, dairy processing companies and financial institutions. The key purpose of the seminar was to facilitate dialogue on the potential of the dairy industry and the availability of these tried-and-tested production models which can facilitate the identification of an optimum mix of resources and financial considerations to generate maximum profitability from the farm at each level of output as a commercial venture.

Following the seminar, DFCC Bank Vice President MSME Chandana Wanigasena said: “As financiers of this segment, this level of understanding of the key success factors is critical to support such enterprising farmers and builds confidence in the sector.”

MOD Finance and Investment Director Chandana Basnayake said: “Transforming the farmers’ mindset to think as entrepreneurs and view their farms as a commercial venture is helping them manage it sustainably and build resilience and bandwidth to cushion some of the external shocks and this has been the success.”