Production Costs, Profitability, and Challenges in Dairy Farming: Insights from Kaski District, Nepal

Background and Objective: Milk production plays a crucial role in Nepal's agricultural economy, driven by population growth and rising incomes. However, a limited understanding of production cost dynamics restricts sustainable profitability in the sector. This study aims to analyze the costs, productivity, and profitability of milk production in the Kaski District of Nepal. Materials and Methods: A total of 120 small-scale dairy farms were surveyed using structured questionnaires, interviews, and telephone surveys. Data were processed and analyzed using Microsoft Excel and SPSS. Key cost components and profitability ratios were calculated to assess economic viability. Pearson’s correlation was applied using Microsoft Excel 2016 to assess linear relationships between variables, assuming normal distribution, with significance set at p<0.05. Results: The cost of producing one liter of milk averaged Rs. 43 for cattle and Rs. 55.8 for buffalo. Despite higher production costs, buffalo farming showed greater profitability with a revenue/cost ratio of 1.81, compared to 1.18 for cattle. Variable costs emerged as the most influential factor on profit margins. Farmers prioritized taste and fat content for pricing and preferred monthly payments. Major challenges identified included high labor requirements with low returns and marketing issues due to limited product diversification and seasonal supply fluctuations. Conclusion: Buffalo farming proves more profitable than cattle farming in the Kaski District. The study highlights key economic challenges and offers insights for policymakers, farmers, and stakeholders to enhance the sustainability and profitability of Nepal’s dairy sector.