IOSR Journal of Agriculture and Veterinary Science (IOSR-JAVS) ISSN : 2319-2380 Volume 1, Issue 1 (Sep.-Oct. 2012), PP 36-44 www.iosrjournals.org www.iosrjournals.org 36 | Page An Empirical Study of Cost of Milk Production in Timergara District Dir, Pakistan Altaf Hussain 1 , Fayaz Ali Shah 2 , Jawad Hussain 3 1, 2, 3 (PhD Student, Faculty of Management and Human resource Development, University Technology Malaysia). Abstract: This study was conducted in Timergara District Dir (Lower) Pakistan to estimate the cost of milk production. The methodology used for this study is mainly quantitative. Data was collected through questionnaire from a sample size of 80 farmers in the town of Timergara. The cubic cost function model was used to analyze the collected data. The study shows that average values of dry and milking buffaloes were 2 and 42 respectively while the average milk production per buffalo was 0.11 mounds (5.5 kg). The major cost components of milk production were green fodder, dry fodder, concentrates, medicines, management, equipment, building and other miscellaneous. The total fixed cost (TFC) and average variable cost (AVC) per farm was 39761 and 468.51 rupees respectively. The marginal cost (MC) was minimum at output level 680 and the average variable cost (AVC) was minimum at i.e. Rs.468. The optimal level of milk production was 1232 mounds (61600 kg). The results show that none of the sampled farmers operated at the optimum level of operation. Keywords: Cost, Milk, Pakistan, Production, Return, Timergara, I. Introduction The importance of livestock sector in Pakistan’s agriculture is not limited to the production of milk and milk products only, since it provides income and food to a significant portion of the population. Consumption of milk and milk products in the country is relatively high as compared to other similar developing countries. The livestock also provides high quality protein. The major milk-producing animals in Pakistan are buffaloes, cows, sheep and goats. However almost all the milk marketed in the country comes from buffaloes and cows. The population of buffaloes, cows, sheep and goats is 30.8 millions, 34.3 millions, 27.8 millions and 59.9 millions respectively (GOP, 2009-10). Livestock contributes 11.4% to GDP (GOP, 2009-10). Its net foreign exchange earnings were to the tune of Rs. 39.5 billion in 2008-2009, which is almost 9% of the overall export earnings of the country. The contribution of livestock sector towards GDP is more than any individual major crop. The role of livestock in rural economy may be realized from the fact that 30-35 million rural populations is engaged in livestock raising, having household holdings of 2-3 cattle/buffaloes and 5-6 sheep / goats per family deriving 30-40% of their income from it (GOP, 2009-10). Milk, beef, mutton, poultry and eggs are the major livestock products. However, in terms of retail value, milk is the most important livestock product in Pakistan. Being the 6 th or 7 th largest milk producer in the world, Pakistan is not self sufficient in milk and therefore every year a significant amount of foreign exchange is spent on the import of dairy products mainly dry milk powder and condensed and evaporated milk. Dairying is considered to be a supplementary enterprise to crop production and therefore the problems relating to milk production have never engaged the serious attention of researchers. The objective of achieving self-sufficiency in food has led the policy makers and researchers to focus their attention on increasing the output of major food crops. Consequently, the milk production and marketing system have not been researched adequately in Pakistan. A few studies (Mahmood, 1997 and Khan 1999) pertaining to milk production and marketing have been carried out, however these too are limited in scope and analysis. Additionally, most of these studies are limited to Punjab province with one exception by Khan (1999). As for as the scope of livestock sector is concerned in Khyber Pakhtunkhwa (KPK), it is relatively more important than livestock in the province of Punjab and Sindh. Punjab and Sindh have relatively more plain land with good irrigation system and also these provinces have relatively good industrial base. KPK however has mountainous zones particularly in the northern part of the province. These hilly areas are although not that much suitable for crops but more appropriate for livestock. As reported earlier research studies pertaining to milk production and marketing are scarce in Pakistan. The situation in KPK is even worse. Keeping in view the deficiencies in available literature, the study in hand is an attempt to fill these gaps.