Moo! The first ever shipment of American cows came to Pakistan via air cargo in 2016. But that experiment wasn’t too successful. This month, according to a recent tweet by Bureau of South and Central Asian Affairs of the US State Department, the first-ever commercial sea shipment of 1,765 U.S. Holstein cows has arrived in Pakistan. Will this time be different?
Based on BR Research’s channel checks with the industry, the biggest reason why the first few orders of American cows were not able to excite the market and create further demand in Pakistan was the fact that they were not housed in the right farms, i.e. they were not put in the best of farm management environment.
In the dairy farm segment, breed is only one factor of success. According to consensus estimates, above a certain threshold of milk yield, farm success mainly depends on farm management rather than animal genetics; say about 15 percent success contribution is attributed to genetics and 85 percent to farm management.
But this doesn’t mean that genetics are not important. Afterall genetics, and the battle for Pakistan’s farms, are the reason why American cattle has been imported this year. (See BR Research’s The battle for Pakistan’s farms November 27, 2019).
If Pakistani’s cattle yields about 8-12 litre milk on average depending on whose estimates you rely on, then American cattle yields more than 40 litre per day, going up to 45 litres as well. Australian and Dutch offer 20-25 litres and 30-35 litres respectively with variances depending on breed. Which is why American cows are expensive.
A few months ago, when an Australian cow cost $2200-2300 after arriving in Pakistan, and Dutch cost $2700-2800, the delivered cost of American animal was about $3000-3200. These are no small differences when a company has to set up a farm of minimum 500 animals, if not 1000-1500 animals, especially in a depreciating PKR scenario.
In the US and in many other countries, once a dairy animal is depreciated, i.e. its calving cycle is complete and lactation exhausted, the animal is sold in the meat market at a price close to the initial purchase prices of a fresh born heifer.
In Pakistan the beef market isn’t fully developed. This is partly because of price regulation by DMG officials, and partly because of the nature of beef dishes that Pakistanis eat which does not put a premium on meat quality per se. After all, most beef ends up as a kebab, cooked at high heat; the battle for consumer palate is won not by meat but by the masala.
Owing to these factors the completely depreciated dairy cow is sold about at one-fifth of the initial cost price paid for that animal. This high level of depreciation means that the market potential for expensive American cows in Pakistan faces a challenging environment, especially considering the fact that American cows have lower lactation cycles as compared to Australian and Dutch animals. High milk yield comes at a trade-off of lower lactation cycles; the model works well in the US since their consumers pay a premium on beef, which is why even a depreciated cow sells well in the US.
Keep in mind that the American animal is perceived to be expensive to keep. Most industry experts that BR Research has spoken to say that because American cows have such high yields they need to be kept like royal queens, requiring superb clean-in-place environment, perfect feed and preventive medical care (both of which are expensive), and a cooling shed. Most small and medium farmers are unable to provide such luxury, especially when loose milk prices are regulated which in turn is preventing growth in UHT and pasteurized milk from taking off.
The cooling shed factor seems a bit difficult to comprehend. Unlike the Australian and Dutch cattle, the US animals imported in Pakistan come from places like Florida, Kansas, New Mexico where temperature and humidity is rather close to that in Pakistan. But local dairy industry seems to have a consensus view that American cattle needs cooling sheds. While cooling sheds argument may be contested, other aspects of high cost maintenance are not, which throws American cows out of the feasibility equation.
The biggest question however is the question of fat. Pakistanis prefer high fat content, hence the preference for buffalo milk. In contrast, American cattle has much less fat (compared to her Dutch and Australian cousins) since there is an inverse relationship between fat content and milk yield.
This is a major policy issue, which need to be addressed through a breeding and dairy policy, which Pakistan does not have. More on that later! But the answer to question the posed at the start is this: current dairy/meat business policy environment and economic fundamentals are not favourable to high yielding imported animals, especially American which are the most expensive. But that does not mean that Americans livestock exporters will not try to experiment in Pakistan in hopes of getting some used-cases and success stories which they will later build on to sell more animals when both Pakistan’s economic fundamentals and sectoral business policy ripen.