Profitability Analysis No.

11/2010

Profitability Analysis:

25-Dairy Cow Module

Philippine Council for Agriculture, Forestry and Natural Resources Research and Development
Department of Science and Technology
ISO 9001:2008
Providing science solutions for a vibrant agriculture, forestry and natural resources
About PCARRD
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 Profitability Analysis:
25-Dairy Cow Module

Philippine Council for Agriculture, Forestry and Natural

Resources Research and Development (PCARRD)
Department of Science and Technology (DOST)

Los Baños, Laguna

2010
First Edition 2010

ISSN: 1908-8043

Bibliographic Citation:
Philippine Council for Agriculture, Forestry and Natural Resources Research and
Development. Profitability analysis: 25-dairy cow module. Los Baños, Laguna:
PCARRD-DOST, 2010. 37p. –(Profitability Analysis No.11/2010)
 T his year, the Philippine Council for Agriculture, Forestry and Natural Resources

Foreword
Research and Development (PCARRD) offers a new technology publication that
promises to be fully utilizable and handy.

The Profitability Analysis (PA) arose from our yearning to address your needs as
small and micro entrepreneurs, farmers, and growers. More than just a handout,
this innovative package of information provides tools to help you gain and secure
a niche in your business enterprise.

The PA series is based on our study of selected commodities. Here you will find the
technical and financial data you will need to put up an agricultural enterprise. It
presents analytical tools you can use in project planning and in predicting how
the business would operate under a set of assumptions. Thus, it ensures that your
projects are technically and economically feasible for implementation. Through
the profitability analysis and other information, we at PCARRD, hope to contribute
substantially in providing livelihood options for Filipinos, especially those in rural
communities.

This PA contains the projected income statement and cash flow for a 25-dairy cow
module for dairy farming. It also includes package of technology and other useful
data adopted from the existing model by the National Dairy Authority.

Feel free to make use of the information in these pages. Contact us for any further
information you may need or better yet, for any suggestions on how we can make
this publication better. Together, we can improve the production system for dairy
cow farming and seal its importance in our national economy.

PATRICIO S. FAYLON
Executive Director

iii
 T he Philippines recognizes the need to develop its dairy industry. Local milk
Message
production, which constitutes 5% of the total demand for milk, comes mainly
from dairy cows (about 70%) in areas supported by government and which are
mostly in the hands of small-hold and some semi-commercial dairy farmers who
are members of dairy cooperatives. The country, therefore, imports the greater
slack in supply.

For the local dairy industry to prosper, interested entrepreneurs and other
investors should be encouraged to invest in dairy farming. They have several
options to consider — a small-hold module of 5–10 dairy cows to a semi-
commercial level of 20–25 cows or 50–100 cows — depending on the resources
available. This PA, focusing on a 25-cow module, has been drawn up based on
actual experiences of dairy farmers with various farm modules. It addresses a
major concern of entrepreneurs and investors: profitability. Having a sure market
for milk, a combination of good dairy animals and an optimum level of farm
inputs coupled with the adoption of mature technologies and an entrepreneurial
spirit will surely spell success in the dairy business operations.

In the long term, a developed local dairy base herd can be a source of cheap
island-born dairy animals that can ensure dairy farmers with significant
production volume of milk, thereby closing the gap between demand and local
supply.

Through the efforts of PCARRD, in collaboration with the University of the

Philippines Los Baños, College of Agriculture–Animal and Dairy Sciences Cluster
(UPLB-CA-ADSC) and the National Dairy Authority (NDA), a comprehensive study
based on experiences and lessons learned from our dairy partners has come into
being. Let this be a guide for beginners and dairy enthusiasts alike.

ORKHAN H. USMAN CESAR C. SEVILLA

Administrator, NDA Director, UPLB-CA-ADSC

iv
 Foreword iii

Contents
Message iv

Introduction 1

Profitability Analysis
Capital investments, 25-dairy cow module 2
Working capital and pre-operating expenses, 25-dairy cow
module 3
Capital investments after year 1, 25-dairy cow module 3
Initial investment, 25-dairy cow module 3
Depreciation table (Straight line method, zero
salvage value) 4
Herd projection, 25-dairy cattle module 6
Annual sales projection, 25-dairy cow module 8
Projected feed/concentrate and mineral-salt mix costs,
25-dairy cow module 10
Veterinary drugs and biologics costs, 25-dairy cow module 12
Projected income statement, 25-dairy cow module 14
Projected cash flow statement (before and after financing),
25-dairy cow module 16
Measures of project worth 18
Sensitivity analysis 19
Technical assumptions, 25-dairy cow module 20
Financial assumptions, 25-dairy cow module 22

Package of Technology 24
Close-up of milking activity.
Introduction I t is vital to develop the local dairy industry considering that local milk
production constitutes 5% of the total demand for milk. Local milk
production comes mainly from dairy cows (around 70%) in areas supported
by the government, which are mostly in the hands of small-hold and some
semi-commercial dairy farmers who are members of dairy cooperatives. Cow’s
milk produced locally are processed into different milk products like fresh milk,
flavored milk, white and other cheeses, yoghurt, ice cream, and confectioneries.

Entrepreneurs who would like to invest in dairy farming have several options.
They can start with 5–10 dairy cows or at a semi-commercial level like a
20–25 cow module depending on the
Initial Capital P5,057,973
resources available such as land, which is
the main source of feeds. Although the
NPV (based on a 10-year cash flow common practice of more progressive
projection at 15% discount rate) P923, 617.15 local dairy farmers is to lease the land
for pastures, this paper presents the
IRR (based on a 10-year cash
flow projection) 22% profitability of a 25-dairy cow module
with the land assumed to be owned or
Payback Period 5.9 years purchased by the dairy farmer. This venture
can be a source of breedable heifers for
dairy farmers and can produce more milk
for the cooperative or local processing plants.
However, the effectiveness of a profitable dairy operation largely depends
on a sure market for raw milk, good dairy animals, farm inputs, adoption of
recommended technologies, and an efficient entrepreneurial dairy farmer.

The initial capital investment of P5.06 million is fully recovered in 5.9 years. Based
on a 10-year cash flow projection, after financing, the internal rate of return (IRR)
is 22% while the net present value (NPV) is at P923, 617.15 at the discount rate of
15%.
2 Profitability Analysis: 25-Dairy Cow Module

Capital investments, 25-dairy cow module.

Particulars Quantity Unit Unit Cost (P) Total Cost (P)
Dairy animals
Local pregnant dairy heifers 25 head 50,000 1,250,000
Pick-up bull 1 head 45,000 45,000
Land 11 ha 200,000 2,200,000
Farm infrastructure and facilities
Housing 120 m2 1,000 120,000
- For breedable heifers, yearling
- Heifers, calves and bull
Milking parlor 20 m2 1,000 20,000
- Milking area and milk room
Feed storage 10 m2 1,000 10,000
Electrical and water system
- For facilities and installation 15,000
Farm equipment
Milking machine 1 unit 50,000 50,000
- Portable,double bucket/double claw
Milk cans
- (40-L capacity) 4 pcs 5,000 20,000
- (10-L capacity) 2 pcs 3,000 6,000
Weighing scale for feeds ( 50 kg cap) 1 unit 17,000 17,000
Grass chopper 1 unit 15,000 15,000
Electric fence controller 1 unit 10,000 10,000
Cooling tank ( 250-L capacity) 1 unit 125,000 125,000
Pasture establishment
Napier ( for cut and carry) 3 ha 20,000 60,000
Bracharia grass (for grazing) 8 ha 20,000 160,000
Total capital investment 4,123,000
 Profitability Analysis: 25-Dairy Cow Module 3

Working capital and pre-operating expenses, 25-dairy cow module.

Particulars Quantity Unit Unit Cost (P) Total Cost (P)
Repairs and maintenance 5,000
Farm tools 5,500
Office supplies 5,000
Feeds/ mineral-salt mix 600,523
Utilities, water and electricity 5,000/month 60,000
Fuel and oil 1,500/month 18,000
Fertilizer 58 bags 950 55,100
Farm labor (3 laborers) 36 man-month 3900 140,400
Veterinary drugs and biologics 51 head 450 22,950
Breeding cost 25 head 500 12,500
Business permit fee 10,000
Total working capital and pre- 934,973
operating expenses

Capital investments after year 1, 25-dairy cow module.

Year
Particulars
1 2 3 4 5 6 7 8 9 10
Bulls purchased (P) 45,000 45,000 45,000
Total (P) 45,000 45,000 45,000

Initial investment, 25-dairy cow module.

Particulars Cost (P)
Capital investment 4,123,000
Working capital and pre-operating costs 934,973
Total initial investment 5,057,973
4 Profitability Analysis: 25-Dairy Cow Module

Depreciation table (Straight line method, zero salvage value).

Estimated
Particulars Cost (P) Year 1 Year 2
Useful life
Farm equipment
Milking machine - portable, double 50,000 10 5,000 5,000
bucket/double claw
Weighing scale for animals (50-kg 17,000 10 1,700 1,700
capacity)
Grass chopper 15,000 10 1,500 1,500
Electric fence controller 10,000 10 1,000 1,000
Cooling tank ( 250-L capacity) 125,000 20 6,250 6,250
Farm Infrastructure and Facilities
Housing - for breedable heifers, yearling 120,000 20 6,000 6,000
heifers, calves and bull
Milking parlor (milking area/milk room) 20,000 10 2,000 2,000
Feed storage 10,000 10 1,000 1,000
Total 24,450 24,450
 Profitability Analysis: 25-Dairy Cow Module 5

Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000

1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700

1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500

1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
6,250 6,250 6,250 6,250 6,250 6,250 6,250 6,250

6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000

2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
24,450 24,450 24,450 24,450 24,450 24,450 24,450 24,450

Cattle grazing under coconut trees in Quezon Province.

6 Profitability Analysis: 25-Dairy Cow Module

Herd Projection, 25-dairy cow module.

Particulars Year 1 Year 2 Year 3 Year 4
Breeding stocks
Breedable females 25 25 25 25
Breeding bulls 1 1 1 1
Total breeding stocks 26 26 26 26
Beginning inventory 26 38 47 44
Animals introduced
Female calves 13 9 10 9
Male calves 12 10 9 10
Bulls purchased - - - 1
Total animals introduced 25 19 19 20
Animals sold/lost*
Mortality
Female calves 1 - 1 -
Male calves - 1 - 1
Sold
Culled dams (original) - - - -
Culled bulls (original) - - - 1
Replacement bulls (culled) - - - -
Replacement heifers - - 12 9
Male calves 12 9 9 9
Total animals sold/lost 13 10 22 20
Ending inventory 38 47 44 44
Replacement heifers - 12 9
Yearling heifers 12 9 9
Number of replacement females**
* due to mortality
** breedable heifers to replace culled cows
 Profitability Analysis: 25-Dairy Cow Module 7

Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

25 25 21 18 15 13
1 1 1 1 1 1
26 26 26 26 26 26
44 44 44 44 44 44

10 9 10 9 10 9
9 10 9 10 9 10
- - 1 - - 1
19 19 20 19 19 20

1 - 1 - 1 -
- 1 - 1 - 1

- 4 3 3 2 2
- - - - - -
- - 1 - - 1
9 5 6 6 7 7
9 9 9 9 9 9
19 19 20 19 19 20
44 44 44 44 44 44
9 9 9 9 9 9
9 9 9 9 9 9
4 7 10 12
8 Profitability Analysis: 25-Dairy Cow Module

Annual sales projection, 25-dairy cow module.

Particulars Year 1 Year 2 Year 3
Milk
Breeding cows 25 25 25
% of animals on the milk line 100% 76% 76%
Number of animals on the milk line 25 19 19
Milk production per animal per day (kg) 10 12 12
Milking period (day) 300 300 300
Total milk production (kg) 75,000 68,400 68,400
Less: total milk fed to calves 3,120 2,160 2,400
Milk available for sale (kg) 71,880 66,240 66,000
Selling price of milk per liter (P) 22 22 22
Income from sale of milk (P) 1,581,360 1,457,280 1,452,000
Animals
Culled dams
Culled bulls
Replacement bulls (culled)
Replacement heifer 600,000
Male calves 24,000 18,000 18,000
Total income from animal sales 24,000 18,000 618,000
Total sales (P) 1,605,360 1,475,280 2,070,000
 Profitability Analysis: 25-Dairy Cow Module 9

Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

25 25 25 25 25 25 25
76% 76% 76% 76% 76% 76% 76%
19 19 19 19 19 19 19
12 12 12 12 12 12 12
300 300 300 300 300 300 300
68,400 68,400 68,400 68,400 68,400 68,400 68,400
2,160 2,400 2,160 2,400 2,160 2,400 2,160
66,240 66,000 66,240 66,000 66,240 66,000 66,240
22 22 22 22 22 22 22
1,457,280 1,452,000 1,457,280 1,452,000 1,457,280 1,452,000 1,457,280

170,000 127,500 127,500 85,000 85,000

46,750
46,750 46,750
450,000 450,000 250,000 300,000 300,000 350,000 350,000
18,000 18,000 18,000 18,000 18,000 18,000 18,000
514,750 468,000 438,000 492,250 445,500 453,000 499,750
1,972,030 1,920,000 1,895,280 1,944,250 1,902,780 1,905,000 1,957,030
10 Profitability Analysis: 25-Dairy Cow Module

Projected feed/concentrate and mineral-salt mix costs, 25-dairy cow module.

Particulars Year 1 Year 2 Year 3 Year 4
Number of animals to be given
feed/concentrate (head)
Dry cows - 6 6 6
Milking cows 25 19 19 19
Bulls 1 1 1 1
Replacement heifers - - 12 9
Yearling heifers - 12 9 9
Female calves 13 9 10 9
Feed/concentrate consumption (in kg)
Dry cows (grower feeds) 0 780 780 780
Milking cows (lactating concentrate) 30,000 27,360 27,360 27,360
Bulls (grower feeds) 183 183 183 183
Replacement heifers (grower feeds) - - 4,380 3,285
Yearling heifers (grower feeds) - 4,380 3,285 3,285
Female calves (starter and grower feeds) 4,745 3,285 3,650 3,285
Feed/concentrate cost (in P)
Dry cows (grower feeds) 0 11,700 11,700 11,700
Milking cows (lactating concentrate) 510,000 465,120 465,120 465,120
Bulls (grower feeds) 2,738 2,738 2,738 2,738
Replacement heifers (grower feeds) - - 65,700 49,275
Yearling heifers (grower feeds) - 65,700 49,275 49,275
Female calves (starter and grower feeds) 78,585 54,405 60,450 54,405
Total feed/concentrate cost 591,323 599,663 654,983 632,513
Mineral-salt mix consumption (in kg)
For lactating cows 750 570 570 570
For non-lactating animals 256 511 694 621
Total consumption 1,006 1,081 1,264 1,191
Mineral-salt mix cost (P)
For lactating cows 6,863 5,216 5,216 5,216
For non-lactating animals 2,338 4,676 6,346 5,678
Total mineral-salt mix cost (P) 9,200 9,891 11,561 10,893
Total cost (P) 600,523 609,554 666,544 643,406
 Profitability Analysis: 25-Dairy Cow Module 11

Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

6 6 6 6 6 6
19 19 19 19 19 19
1 1 1 1 1 1
9 9 9 9 9 9
9 9 9 9 9 9
10 9 10 9 10 9

780 780 780 780 780 780

27,360 27,360 27,360 27,360 27,360 27,360
183 183 183 183 183 183
3,285 3,285 3,285 3,285 3,285 3,285
3,285 3,285 3,285 3,285 3,285 3,285
3,650 3,285 3,650 3,285 3,650 3,285

11,700 11,700 11,700 11,700 11,700 11,700

465,120 465,120 465,120 465,120 465,120 465,120
2,738 2,738 2,738 2,738 2,738 2,738
49,275 49,275 49,275 49,275 49,275 49,275
49,275 49,275 49,275 49,275 49,275 49,275
60,450 54,405 60,450 54,405 60,450 54,405
638,558 632,513 638,558 632,513 638,558 632,513

570 570 570 570 570 570

639 621 639 621 639 621
1,209 1,191 1,209 1,191 1,209 1,191

5,216 5,216 5,216 5,216 5,216 5,216

5,845 5,678 5,845 5,678 5,845 5,678
11,060 10,893 11,060 10,893 11,060 10,893
649,618 643,406 649,618 643,406 649,618 643,406
12 Profitability Analysis: 25-Dairy Cow Module

Veterinary drugs and biologics costs, 25-dairy cow module.

Particulars Year 1 Year 2 Year 3 Year 4
Cost of veterinary drugs and biologics * P450 per head/year
Total number of animals 51 57 66 63
Total cost of veterinary drugs and biologics 22,950 25,650 29,700 28,350
Breeding costs ** P500 per head/year
Total number of animals 25 25 25 25
Breeding expense (P) 12,500 12,500 12,500 12,500
* Calves are given drugs and biologics starting at 4 months of age.
**For all breedable females net of mortality and culling.

Injection of dewormer.
 Profitability Analysis: 25-Dairy Cow Module 13

Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

63 63 63 63 63 63
28,350 28,350 28,350 28,350 28,350 28,350

25 25 25 25 25 25
12,500 12,500 12,500 12,500 12,500 12,500

Animal identification by ear notching.

14 Profitability Analysis: 25-Dairy Cow Module

Projected income statement, 25-dairy cow module.

Particulars Year 1 Year 2 Year 3

Projected income
From sale of milk 1,581,360 1,457,280 1,452,000
From sale of dairy animals 24,000 18,000 618,000
Gross sales 1,605,360 1,475,280 2,070,000
Less: Production cost
Feeds/ concentrates 591,323 599,663 654,983
Mineral-salt mix 9,200 9,891 11,561
Breeding cost 12,500 12,500 12,500
Veterinary drugs and biologics 22,950 25,650 29,700
Farm labor 140,400 140,400 140,400
Total Production cost 776,373 788,104 849,144
Gross margin 828,987 687,176 1,220,856
Less: Overhead expenses
Repair and maintenance 5,000 5,000 5,000
Office supplies 5,000 5,000 5,000
Farm tools 5,500 5,500 5,500
Utilities, water and electricity 60,000 60,000 60,000
Fuel and oil 18,000 18,000 18,000
Fertilizer 55,100 55,100 55,100
Depreciation 24,450 24,450 24,450
Total overhead expenses 173,050 173,050 173,050
Net profit (before interest) 655,937 514,126 1,047,806
Less: Interest expense on loan amortization 531,087.17 531,087.17 452,318.68
Net profit 124,849.84 (16,961.17) 595,487.32
 Profitability Analysis: 25-Dairy Cow Module 15

Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

1,457,280 1,452,000 1,457,280 1,452,000 1,457,280 1,452,000 1,457,280

514,750 468,000 438,000 492,250 445,500 453,000 499,750
1,972,030 1,920,000 1,895,280 1,944,250 1,902,780 1,905,000 1,957,030

632,513 638,558 632,513 638,558 632,513 638,558 632,513

10,893 11,060 10,893 11,060 10,893 11,060 10,893
12,500 12,500 12,500 12,500 12,500 12,500 12,500
28,350 28,350 28,350 28,350 28,350 28,350 28,350
140,400 140,400 140,400 140,400 140,400 140,400 140,400
824,656 830,868 824,656 830,868 824,656 830,868 824,656
1,147,374 1,089,132 1,070,624 1,113,382 1,078,124 1,074,132 1,132,374

5,000 5,000 5,000 5,000 5,000 5,000 5,000

5,000 5,000 5,000 5,000 5,000 5,000 5,000
5,500 5,500 5,500 5,500 5,500 5,500 5,500
60,000 60,000 60,000 60,000 60,000 60,000 60,000
18,000 18,000 18,000 18,000 18,000 18,000 18,000
55,100 55,100 55,100 55,100 55,100 55,100 55,100
24,450 24,450 24,450 24,450 24,450 24,450 24,450
173,050 173,050 173,050 173,050 173,050 173,050 173,050
974,324 916,082 897,574 940,332 905,074 901,082 959,324
361,734.92 257,563.60 137,766.57
612,589.08 658,518.40 759,807.43 940,332 905,074 901,082 959,324
16 Profitability Analysis: 25-Dairy Cow Module

Projected cash flow statement (before and after financing), 25-dairy cow module.
Particulars Year 0 Year 1 Year 2 Year 3
Inflows
Gross income from sale of milk 1,581,360 1,457,280 1,452,000
Gross income of dairy animals 24,000 18,000 618,000
Inventory value of animals
at year 10
Residual value of land
Residual value of infrastructure,
facilities and equipment
Total cash inflows 1,605,360 1,475,280 2,070,000
Outflows
Investment costs
Land 2,200,000
Pasture establishment 220,000
Farm and infrastructure 165,000
facilities establishment
Purchase and installation 243,000
of farm equipment
Purchase of dairy animals 1,295,000
Working capital and 934,973
pre-operating cost
Total production cost 776,373 788,104 849,144
Total overhead expenses 148,600 148,600 148,600
(less depreciation)
Total cash outflows (before financing) 5,057,973 924,973 936,704 997,744
Net Cashflow (before financing) (5,057,973) 680,387 538,576 1,072,256
 Profitability Analysis: 25-Dairy Cow Module 17

Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

1,457,280 1,452,000 1,457,280 1,452,000 1,457,280 1,452,000 1,457,280

514,750 468,000 438,000 492,250 445,500 453,000 499,750
1,673,000

3,300,000
122,500

1,972,030 1,920,000 1,895,280 1,944,250 1,902,780 1,905,000 7,052,530

45,000 45,000 45,000

824,656 830,868 824,656 830,868 824,656 830,868 824,656

148,600 148,600 148,600 148,600 148,600 148,600 148,600

1,018,256 979,468 973,256 1,024,468 973,256 979,468 1,018,256

953,774 940,532 922,024 919,782 929,524 925,532 6,034,274
18 Profitability Analysis: 25-Dairy Cow Module

Projected cash flow statement (continued).

Particulars Year 0 Year 1 Year 2 Year 3

Financing
Loan Receipt 3,540,581.10
Loan Repayment - 1,056,210.41 1,056,210.41
Payment on interest 531,087.17 531,087.17 452,318.68
Principal payment 525,123.24 603,891.73
Balance 3,467,776.54 2,773,301.05
Net financing 3,540,581.10 - (1,056,210.41) (1,056,210.41)
Net Cashflow (after financing) (1,517,391.90) 680,387 (517,634.41) 16,045.59
Beginning Balance - - 680,387.00 162,752.60
Ending Balance - 680,387.00 162,752.60 178,798.19

Measures of project worth.

Before financing After financing
NPV (net benefit) P461,802.23 P923,617.15
IRR 17% 22%
Payback years 3.6 5.9
BCR 1.05 1.10
 Profitability Analysis: 25-Dairy Cow Module 19

Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

1,056,210.41 1,056,210.41 1,056,210.40

361,734.92 257,563.60 137,766.57
694,475.49 798,646.81 918,443.83
1,974,654.24 1,056,210.41 (0.00)
(1,056,210.41) (1,056,210.41) (1,056,210.40) - - - -
(102,436.41) (115,678.41) (134,186.40) 919,782 929,524 925,532 6,034,274
178,798.19 76,361.78 (39,316.63) (173,503.03) 746,278.97 1,675,802.97 2,601,334.97
76,361.78 (39,316.63) (173,503.03) 746,278.97 1,675,802.97 2,601,334.97 8,635,608.97

Sensitivity analysis.
Case 1 (5% increase in concentrate) Case 2 (5% drop in sales)
Before financing After financing Before financing After financing
NPV (net benefit) P295,024.71 P756,839.63 P81,199.02 P543,013.94
IRR 16% 20% 15% 19%
Payback years 3.73 6.09 3.14 5.23
BCR 1.03 1.08 1.01 1.01
20 Profitability Analysis: 25-Dairy Cow Module

Technical assumptions, 25-dairy cow module.

Production system Semi-intensive
Stocks
Breedable heifers 62.5–75% dairy blood
Breeding bull not less than 75% dairy blood
Sex ratio (male:female) 50:50
Mortality
Dams/bulls/replacements/yearlings 2%
Calves 5%
Culling rate
Breeding bull Cull and replace bull every 4 years
Cows 15% start at year 6
Calves 2%
Conception rate 1st year - 100%, succeeding years - 80%
Calving rate 1st year - 100%, succeeding years - 95%
Percent of breeding cows on the milk line 76%
Animal unit (a.u.) Equivalent
Calves (about 60 kg) 0.50 a.u.
Yearling heifers (about 80 kg) 0.75 a.u
Breedable heifers 1.0 a.u
Mature cows 1 a.u.
Bull 1.25 a.u.
Feeding management Combination indoor/outdoor
Grazing Primarily for milking and dry animals
Cut and carry Primarily for calves,yearlings, heifers, and bulls
Lactation length (days) 300 days
Milk production (L)
1st lactation 10 L/day
2 lactation onwards
nd
12 L/day
 Profitability Analysis: 25-Dairy Cow Module 21

Feed Consumption (Concentrates)

Milking cows 1 kg lactating concentrate per 2.5 L milk
Dry cows 2 kg/head/day for 65 days (grower feeds)
Bull 0.50 kg/head/day (grower feeds) for 365 days
Replacement heifers 1 kg/head/day (grower feeds) for 365 days
Yearling heifers 1 kg/head/day (grower feeds) for 365 days
Female calves 1 kg/head/day for 60 days (calf starter)
1kg/head/day for 305 days ( grower feeds)
Mineral-salt mix consumption For lactating cows only: dairy mineral mix is
given at 100 g/hd/day
For non-lactating animals (all ages): mineral mix
is given at 50 g/head/day
Roughage supply
Dams 67.5 kg per head/day
Bull 70kg /head/day
Breedable heifers 45 kg/head/day
Yearling heifers 27.5 kg/head/day
Calves 17.5 kg/head/day
Pasture Stocking Rate (cut and carry: 1 ha: 7 a.u.)
Stocking Rate (grazing: 1 ha: 3 a.u.)
Housing/facilities requirement
Housing for the breedable heifers, 105 m2
Yearling heifers, calves, and bull
Milking parlor (milking area and milk room) 20 m2
Feed storage 10 m2
22 Profitability Analysis: 25-Dairy Cow Module

Financial assumptions, 25-dairy cow module.

Capital Costs
Animals
Local pregnant dairy heifers P50,000/head
Pick-up bull P45,000/head
Land P200,000/ha
Pasture establishment for napier - cut and carry (includes P20,000/ha (3 ha)
land preparation, planting materials,planting, and
weeding)
Pasture establishment for Bracharia - grazing (includes land P20,000/ha (8 ha)
preparation, planting materials,planting, and weeding)
Farm equipment
Milking machine (portable, double bucket/doubleclaw) 1 unit at P50,000
Milk cans (40-L capacity) 4 pcs at P5,000/pc
Milk cans (10-L capacity) 2 pcs at P3,000/pc
Weighing scale for feeds ( 50-kg capacity) 1 pc at P17,000/pc
Grass chopper 1 pc at P15,000/pc
Electric fence controller 2 pcs at P10,000/pc
Cooling tank 1 unit, 250-L capacity at P125,000/unit
Farm infrastructure
Housing for the breedable heifers, yearling heifers, P1,500.00/m2
calves and bull
Milking parlor (milking area and milk room) P1500.00/m2
Feed storage P1,500.00/m2
Electrical and water system installation P15,000 for facilities and installation
Cost of concentrate/feeds
Lactating concentrate (16–18% crude protein [CP]) P17/kg
Calf starter (20–24% CP) P24.50/kg
Grower feeds (14% CP) P15/kg
Cost of mineral-salt mix Mineral-salt mix: P9.15/kg
 Profitability Analysis: 25-Dairy Cow Module 23

Working Capital ( year 1)

Office supplies P5,000/year
Repair and maintenance P5,000/year
Farm tools P5,500/year
Utilities, water and electricity P5,000/month or P60,000/year
Fuel and oil P1,500/month or P18,000/year
Fertilizer
Napier: 1 bag/ha x 6 cuttings x P950/bag/ha P17,100/year
Grazing: 1/2 bag/ha x 10 grazings x P950/bag/ha x 8 ha (organic P38,000/year
fertilizer will also be utilized )
Farm labor (at P150/day/hd x 6 days/wk x 52 weeks) with 3 laborers P140,400/year
Vet drugs and biologics P450/ head/year
Breeding cost P500/ head/year
Concentrate cost P591,323/year
Mineral-salt mix P9,200/year
Selling prices of animals and milk
Replacement/breedable heifers P50,000/head
Culled dams P42,500/head
Culled bulls P46,750/head
Male calves (7 days old) P2,000/head
Milk P22/L

Details of loan
Amount loaned 70% of total investments
Farmer’s equity 30% of total investments
Interest 15%
Terms of loan 5 years to pay
One year grace period on
principal
 24 Profitability Analysis: 25-Dairy Cow Module

Production System • Intensive/Total confinement

Package of Technology
• Semi-intensive
• Extensive/Grazing

Stocks
Heifer • Local born with 62.5–75% dairy blood
Bull • Local born with dairy blood of not less than 75%

Selection
of Dairy Animal • Select dairy animals preferably with production
records
• Select animals with good body condition and
conformation, strong legs, and with 4 functional
teats
• Select heifers that are docile and easy to handle

Land • 11 hectares (3 ha of Napier for cut and carry

and 8 ha of Bracharia for grazing)

Housing

Floor space area

Heifer • 5 square meters (m2) (1–2 years old)
Bull • 6 m2 (3 years and above)
Yearling • 4.0 m2 (1–2 years old)
Calf • 1.0–2.0 m2 (1–6 months old)
Type of housing • Permanent, well-ventilated, well-drained, and
with water supply
• Complete or partially concrete floors with
galvanized iron (GI) pipes or wood railings
• Semi-monitor type with GI sheets roofing
 Profitability Analysis: 25-Dairy Cow Module 25

Milking area/chute • Concrete floor and chute measuring 1 m x 2 m made of

GI pipes or wood to restrain the cows during milking
• Constructed within or beside the animal house

Milking cows in simple milking parlor.

26 Profitability Analysis: 25-Dairy Cow Module

Management Practices

Herd classification The herd is divided into smaller groups to ensure appropriate
nutrition of the various age groups of animals, to minimize if
not avoid premature breeding, and to provide appropriate
care to various classes of animals. The herd is grouped into
the following:
• Calves – birth up to 3 months old
• Growing animals – 4 to 12 months old
• Yearling heifers – 12 months to breeding size
of 250–300 kilograms (kg)
• Breedable heifers – breeding size up to 2 months
before calving
• Females at 8 months pregnancy stage or within
2 months prior to calving (cows and heifers)
• Milking cows – cows on the milk line
• Dry cows – cows off the milk line, open or less than
7 months pregnant
• Bull – “pick-up” bull

Calf management 1. Management of newly-born calf:

• Remove mucus from mouth and nostrils
• Wipe with dry cloth
• Cut the umbilical cord 3 inches from the base and apply
disinfectant (iodine solution) to prevent navel ill
• Give colostrum within the first hour of life, 2 liters (L)
of colostrum and another 2 L, 6 hours thereafter
2. Calves are disbudded using a red-hot iron within 2 months
of age.
3. Identification marks such as ear tattoo; ear notch or ear tag
is put for proper animal identification.
4. Removal of extra teats is done during the first week.
5. Rice hulls are used as beddings in calf hutches for the calves
to keep them dry at all times.
 Profitability Analysis: 25-Dairy Cow Module 27

Growing and
yearling animals 1. Group the animals according to size to minimize
competition for feeds.
2. Dispose the male calves as early as possible (1 week)
to save on milk, feeds and housing except if the calf has the
potential for breeding purposes.
3. Husbandry practices:
a. Branding – to be able to identify the animals even
at a distance
• Freeze branding
• Fire branding
b. Dehorning – cutting of long horns. A tourniquet is
applied to minimize excessive bleeding.

Breedable heifers 1. Heifers should be bred when they are 250–300 kg.
2. Do pregnancy diagnosis at 60 days after artificial
insemination (AI) or natural breeding.
3. Place the breedable heifers with the group of females at
2 months before calving.
4. Allow the animal entry to the milking parlor 2 weeks before
calving to familiarize it with the milking routine.
5. An expert milker should do the first milking.

Milking cows 1. Breed the cow 45 days after calving when in estrus.
2. Pregnancy diagnosis is done 60 days after insemination or
natural breeding.
3. Dry-off the cow when:
a. It is 2 months before calving
b. The milk yield is less than 3 kg/day
c. In poor body condition
d. With chronic mastitis
e. There is injury
28 Profitability Analysis: 25-Dairy Cow Module

4. Procedure in drying-off high milk-yielding cows:

a. Reduce feed and water intake
b. Reduce milking frequency
c. When there was observed mastitis during the lactation
period, identify the causal microorganism and infuse
specific antibiotics into each teat just after the last
milking

Breeding practices

Natural breeding • Observe estrus early in the morning and late in the
afternoon.
• Breed the animal using the AM-PM rule, i.e., if the female is

Pregnancy diagnosis 60 days after breeding.

 Profitability Analysis: 25-Dairy Cow Module 29

observed to be in estrus in the morning, breeding should

be done in the afternoon. If it is observed in the afternoon,
breeding should be done in the morning of the following
day.
• Use natural breeding after one AI service.

Artificial
insemination (AI) • Use frozen semen from genetically superior bulls to
impregnate heifers/cows to avoid inbreeding and ensure
genetically improved offspring.
• Inseminate only cows that exhibit estrus.

Breeding inheat cow using artificial insemination.

30 Profitability Analysis: 25-Dairy Cow Module

Feeding the animals

Ensure that dairy animals receive adequate amounts of water, carbohydrates, proteins,
fats, minerals, and vitamins. These nutrients may be provided through roughages,
concentrate feeds and vitamin-mineral mix supplements.

Types of feeds a. Roughages

• consist of grasses, agricultural and industrial residues,
legume, fodder trees and shrubs that are used as
common feeds for dairy cattle
• cultivated/improved pasture grasses like Napier grass,
Guinea grass, Star grass and others are preferred over
native grasses
b. Concentrate feeds - consist of rice bran, copra meal, corn,
molasses, salt, dicalcium phosphate, limestone, and trace-
mineral mix

Different groups of animals in the herd require different feeds and feeding systems. The
following describes the feeding regimen practiced in the farm:

Feeding Regimen
Age/Condition of Animal
Feeds Quantity
Calves First 5–7 days Colostrum 4 L/day
Day 1 until Whole milk 4 L/day
2 months Calf concentrate (20–24% 1–2.5% of the body
1 week old crude protein [CP]) weight of the calf
Forage grasses Ad libitum
Growing animals, yearling heifers, and Fresh roughage Ad libitum
breedable heifers Grower feed concentrate 1–2 kg
(14% CP)
Pregnant females (7 months pregnant Fresh forage Ad libitum
or 2 months before calving) Dairy concentrates 3–4 kg/head/day
(16% CP)
 Profitability Analysis: 25-Dairy Cow Module 31

Feeding Regimen
Age/Condition of Animal
Feed Quantity
Lactating cows Fresh roughage Ad libitum
Dairy concentrate (16–18% CP) Based on milk yield:
Daily Milk Amount of
Production Concentrate Feed
7–12 L 1 kg per 2.5 L of milk
Less than 7 L 1 kg per 3 L of milk

Dry cows Fresh roughage Full access to grazing (after milking

cows have grazed) /Ad libitum
Grower concentrate (14% CP) 1 kg/head/day
Bulls Fresh forage Ad libitum
Grower concentrate (14% CP) 1 kg/head/day (given every other day)
or 2 kg after each natural service

Note: Ad libitum roughage is 2.5–3.0% of the body weight of the animals on a dry matter basis. For example, a
400-kg cow can consume 45–55 kg fresh forage.
32 Profitability Analysis: 25-Dairy Cow Module

Roughages are important source of

feeds for cattle which can be supplied
by cut and carry.
 Profitability Analysis: 25-Dairy Cow Module 33

Feeding of salt- • Place salt-mineral mixtures on saltboxes and make these

mineral mixture accessible to the animals at all times.

Pasture establishment
Napier grass 1. Establish at least 1,430 m2 of Napier grass pasture per
animal unit of cattle for cut and carry and 3,300 m2 of
Bracharia per animal unit of cattle for grazing to ensure
year round feed supply.
Legume forages 1. Establish legume trees/shrubs along fence lines to provide
cheap source of protein for dairy cattle, i.e., Leucaena sp.
Gliricidia, Desmodium cineria, Desmanthus, and others.
2. Mix legumes like centrosema with pastures utilized for
grazing.

Disease prevention
and health program Implement the following health care practices in the farm:
1. Vaccination – For Ephemeral fever and Hemorrhagic
septicemia once a year
2. Deworming – Every 6 months for mature cows and every
month for calves less than 1 year old
3. Ectoparasite prevention and control – Spray and/or
pouring of anti-flies and ticks solution as needed.
4. Zoonosis Program – Conduct of TB, Brucellosis and
Leptospirosis testing in cooperation with the National
Dairy Authority (NDA) or other government agencies.
34 Profitability Analysis: 25-Dairy Cow Module

Dairy Programs in National Dairy Authority Assisted Areas

Created by the National Dairy Development Act of 1995 (RA 7884), the National Dairy
Authority (NDA) is an attached corporation of the Department of Agriculture mandated
to ensure the accelerated development of the Philippine dairy industry through policy
direction and program implementation.

The four major programs and sub-programs in the National Dairy Development Plan
implemented by NDA to achieve its mission are as follows:

• Herd Build-Up (save-the-herd program, herd infusion, improved breeding efficiency,

animal financing and upgrading of local stocks breeder/multiplier farm operations,
Palit-baka scheme of animal distribution, and bull loan)
• Dairy Business Enhancement (expanded market share in the liquid market, dairy zone
installation, training of dairy managers and entrepreneurs, cost-efficient milk handling
and processing facilities, and installation of quality control systems)
• Milk Quality Assurance (farm and plant audit; installation of quality control systems)
• Expanded Milk Feeding Program (use of local milk for government nutrition programs
using milk, and build-up of Philippine milk fund and inter-agency milk feeding
committees)

The abovementioned programs are being implemented in NDA-assisted areas. The

provinces presently covered by NDA are the following:

South Luzon North Luzon Visayas Mindanao

Cavite Bulacan Cebu Misamis Oriental
Laguna Pangasinan Bohol Misamis Occidental
Batangas Pampanga Siquijor Bukidnon
Quezon Nueva Ecija Antique Davao del Sur
Palawan Zambales Negros Oriental Davao del Norte
Albay Isabela Capiz North Cotabato
Sorsogon Benguet Iloilo Lanao del Norte
Camarines Norte Baguio Negros Occidental Zamboanga del Norte
Camarines Sur Ilocos Norte Leyte Zamboanga del Sur
Rizal Aurora Southern Leyte Zamboanga Sibugay
Bataan Biliran Saranggani

 Profitability Analysis: 25-Dairy Cow Module 35

Milk processing plant.

36 Profitability Analysis: 25-Dairy Cow Module

Dairy Processing Plants (in NDA Assisted Areas).

Region Province Town Barangay

III Bulacan Sta. Maria Bagbaguin

III Nueva Ecija Talavera Poblacion

III Zambales Candelaria Doña Nena Park

IVA Batangas Lipa City Inosluban

IVA Laguna Calauan Lamot II

IVA Laguna Los Baños UPLB, College

IVA Laguna Calauan Lamot II

V Albay Camalig Cabangan

V Camarines Sur Goa Abucayan

V Camarines Sur Pili San Jose

VI Iloilo Tigbauan Cordova Norte

VI Negros Occidental La Carlota City La Granja

VII Negros Oriental Dumaguete City Bajumpandan

VII Cebu Consolacion Pitogo

VIII Leyte Ormoc City Bayong St., Cogon

IX Zamboanga del Norte M.A. Roxas Irasan

X Lanao del Norte Sultan Naga Dimaporo Bauyan

X Misamis Oriental El Salvador Poblacion

XI Davao City Calinan Malagos

 Profitability Analysis: 25-Dairy Cow Module 37

Plant Capacity
Cooperative/Organization Assisted Name Of Dairy Processing Facility
(in Liters)
Sta. Maria Dairy Farmers Multi-Purpose
Sta. Maria Dairy Processing Plant 1,000/batch
Cooperative (SMDMC)
Talavera Dairy Cooperative DVF Processing Plant 300/batch

Tribo Zambaleno Dairy Cooperatives Zambales Processing Plant 300/batch

Batangas Agribusiness Center, Inc.
Batangas Dairy Cooperative (BADACO) 500 /hour
(BAC)
Katipunan ng mga Kooperatibang Maggagatas,
KKMI Milk Processing Plant 1,000/hour
Ink. (KKMI)
DTRI-Animal and Dairy Sciences Cluster, CA-UP Los
ADSC Milk Processing Plant 1,000/hour
Baños
Hacienda Macalauan Dairy Processing
Hacienda Macalauan 1,300/hour
Plant
Albay Dairy Farmers Multi-Purpose Cooperative Albay Dairy Plant 500/batch

Goa Dairy Multi-Purpose Cooperative Goa Dairy Processing 100/hour

Pili Dairy Development Cooperative Camarines Sur Dairy Processing Plant 500/batch

Cordova Norte Multi-Purpose Cooperative Iloilo Milk Processing Plant 500/batch

Negros Occidental Milk Processing
Cod-cod Multi-Purpose Cooperative 500/batch
Plant
Dairy Farmers’ Association of Dumaguete City Dumaguete Milk Processing Plant 500/batch

Cebu Federation of Dairy Cooperatives (CEFEDCO) Cebu Milk Processing Plant 500/hour
Occidental Leyte Dairy Primary Multi-Purpose
Ormoc Milk Processing Plant 500/batch
Cooperative (OLDAPRIMCO)
D’ Village Multi-Purpose Cooperative MRDE Milk Processing Plant 500/batch

Lanao del Norte Foundation, Inc. (LFI) Lanao Milk Processing Plant 2,000/hour
Northern Mindanao Federation of Dairy Cooperatives Northern Mindanao Milk Processing
500/hour
(NMFDC) Plant
Federation of Davao Dairy Farmers Cooperative, Inc. Davao Milk Processing Plant & Retort 500/hour and
(FEDDAFCI) Processing Facility 2,000 pouches/hour
National Dairy Authority (NDA)
NDA Building, BAI Compound
Visayas Avenue, Diliman, Quezon City
Phone: (02) 929-1492;0737;6755
Telefax: (02) 926-8847
Website: http://www.nda.da.gov.ph

Animal and Dairy Sciences Cluster (ADSC)

College of Agriculture
University of the Philippines Los Baños
College, Laguna
Tel No. : (049) 536-3426/2202
Telefax: (049) 536-2547/2205

Credits

Production: PCARRD Secretariat through the livestock research,

socioeconomic research, and the applied communication divisions together with
the Interagency Working Group on the Profitability Analysis of Dairy Cattle
Analysts: Myrna S. Galang, Noe B. Velasco, Sulpicio C. Bayawa, Jr.,
Ma. Theresa M. Rozul, Jamaica Angelica P. Deriquito, Tomas G. Cabagay, and Anna Marie P. Alo
Editor: Joel E. A. Joven
Layout and Design: Paul Jersey G. Leron
Photo Credits: Courtesy of NDA and ADSC
Production Assistant: Carmelita B. Alamban
ISO 9001:2008