The Prospects for Medium-scale Dairy Farming in India

Growing demand for branded milk and dairy products in India is putting pressure on organised players to revisit their existing milk sourcing model with focus on direct raw milk sourcing. 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.

picture of person milking cow in India

Milk processors and other players in the chain will help develop medium-scale farmer-driven dairy farms

The transition from small to medium-scale dairy farming will be more pronounced in some states (such as AP, Punjab, Haryana and Maharashtra) and will happen at a snail’s pace in others (like MP, UP, Bihar, etc.). Milk processors—though most have been slow to understand its impact—will be critical drivers in developing these farmer-driven dairy farms. And nutrition/genetics/equipment companies will be key in developing these farms at the ground level.

Indian dairy industry growing

The organised dairy industry in India has experienced strong growth in the last ten years, mainly driven by the formalisation of perishable milk categories such as milk, curd and paneer from loose to packed formats, coupled with strong growth in value-added dairy segments like cheese, yoghurt, baby food and ice cream. Strong growth prospects in this segment will require quality raw milk and hence the focus on raw milk sourcing directly from farmers.

Investment and commitment needed

In our view, obtaining direct supplies of quality milk will require significant investment and long-term commitment, with dairy companies having to explore various models to strengthen their positions in upstream linkages.