i CHARACTERIZATION OF DAIRY VALUE CHAIN IN PAKISTAN’S PUNJAB: A PRELIMINARY ANALYSIS 1 Hassnain Shah, Nadeem Akmal and Muhammad Sharif Social Sciences Institute, National Agricultural Research Centre, Islamabad, Pakistan hassnainshah1@gmail.com Abstract Value chain analysis plays a key role in understanding the need and scope for systemic competitiveness, upgrading and achieving efficiency which allows entry into global markets. As a survey paper, it presents the importance of livestock and dairy sector in the economy of Pakistan and attempts to characterize the dairy vale chain of Pakistan’s Punjab. Livestock accounts for 52.2 percent of agriculture value added. Small dairy farmers account for 80 percent of the marketed milk. The average farm gate price of milk was 19 Rs./liter while production cost was 13.4 Rs./liter. The informal sector still holds 90 percent of the market. Milk collectors margin varies from 1.5 to 2.5 Rs./liter while khoya makers and de-creamers were getting margins of 10-20 Rs./kg of the produce. Difference in purchased and sale price of UHT milk was about 30 Rs./liter. Demand and supply are the main factors for determining price of milk. There is gap in demand and supply of milk. Due to the central development role played by the dairy value chain, a more comprehensive analysis of its operations than presented in this paper is required. Key Words: Characterization, Dairy value Chain, Milk, Pakistan BACKGROUND Agriculture continues to be the single largest sector of Pakistan, a dominant driving force for growth and the main source of livelihood for 66 percent of the country’s population. It accounts for 21 percent of the GDP and employs 44 percent of the total work force. Within the agriculture sector livestock is now a major sector as it accounts for 52.2 percent of agriculture value added– much more than the combined contribution of major and minor crops (45.3%), 11 percent of GDP and affects the lives of 30-35 million people in rural areas. Average household holdings are 2-3 cattle/buffalo, 3-4 sheep/goats and 10-12 poultry per family which contribute 35 to 40 percent of their income {Government of Pakistan-(GOP 2008a)}. Share of livestock in agriculture growth has jumped from 25.3 to 49.6 percent during last decade. Total number of animals increased by 30 percent in 2006 since 1996. Similarly milk production of cows increased by 42 percent and of buffaloes by 33 percent in same period (GOP 2007a). Pakistan is ranked fifth in the world in milk production, attributable largely to the sheer number of diary animals, it has a very minor 1 Paper presented in the first annual conference of the Indian Society of Agri-Business Management on "Emerging Trends in Agri-Business Management" 25-27 September, 2008 Bangalore, India, co-organized by International Food Policy Research Institute and the Indian Society of Agri-business Management.