KENINGAU INTEGRATED LIVESTOCK CENTRE (KILC) Institute for Development Studies (Sabah)

Presentation for:
THE 6TH MALAYSIA INTERNATIONAL AGRO-BIO BUSINESS
CONFERENCE 2010 FROM 22ND TO 23RD JULY 2010
Putra World Trade Centre, Kuala Lumpur, Malaysia
 BACKGROUND
 The agricultural sector has played an important role in the socio-economic
development of Malaysia. The Third National Agricultural Policy, 1998-2010
(NAP3) has been formulated to ensure agricultural development is in line
with the latest development taking place within and outside the country.
 The Sabah State Government plan to establish an integrated livestock
production area in Keningau is a good initial step towards meeting the
domestic market demand for beef, mutton and dairy product as a primary
source of protein in the daily nutrition needs. Apart from that, through this
program , it is hoped that the supply of imported meat and dairy products
could be reduced and at the same time able to contribute towards
increasing the country’s Gross Domestic Product (GDP)
 To strengthen the development of this project, Sabah Economic and
Development Investment Authority (SEDIA) have appointed the Institute for
Development Studies (Sabah) as the Project Consultant for the
development of an integrated livestock (ruminant) production project in
Keningau, Sabah.
 RATIONALE
 The self-sufficientcy level (SSL) for the production of ruminant livestock is
still low. Thus, Malaysia is still dependent on dairy and meat supply
sourced from outside the country.
 The demand for meat and dairy products is on increasing trend to meet the
requirements of domestic market and the needs of the meat and dairy
processing industry.
 Sabah is one of the two states in Malaysia that is free from all diseases.
This provides an advantage and opportunity for Sabah to export livestock
product and its by-products.
 OBJECTIVES OF KILC
The objectives for the establishment of KILC are:

• To increase the breeder population that will facilitate

selection of high-yielding traits of both beef and dairy cattle
that can be passed on to the next generation of production
animals;

• To select breeds with higher production efficiency; and

• To develop sustainable breeding structure that will produce

breeding stocks and feeder animals in a systematic manner.
Core Components of Sabah Development Corridor

PROPOSED SITE
KILC Proposed Location

PROPOSED AREA
CURRENT INDUSTRY STATUS
 CURRENT STATUS OF LIVESTOCK INDUSTRY
LIVESTOCK POPULATION IN MALAYSIA

Population
Year Cattle Buffalo Goat Sheep -Malaysia’s overall livestock
(Heads) (Heads) (Heads) (Heads) population for cattle and goat
2000 725,918 130,266 237,113 145,257 from year 2000 to 2008 has
2001 723,847 136,909 233,926 128,690 increased by almost 17% for
2002 704,622 120,771 234,795 125,836 cattle and by 85% for goat
2003 741,085 122,183 246,977 115,131
2004 787,384 138,098 264,394 115,498 - The population of buffalo has
2005 781,316 133,232 287,670 115,922
slightly increased and the
2006 775,110 132,932 335,289 116,261
population of sheep has reduced
2007 830,960 134,003 412,678 125,860
2008 847,757 133,381 437,805 124,749

Source: Malaysia Department of Veterinary Services

LIVESTOCK PRODUCTION IN MALAYSIA

45000

40000
• The production of ruminant
products has increased quite
Production (Mt / Mil Litre)

35000

30000
tremendously for the last 9
25000
years. The three main
20000 Beef products, i.e. beef, mutton
15000 Mutton
and milk, have grown more
10000
than 90% from 2000 to 2008
Milk
• Growth Rate (%)
5000
•Beef = 119 %
0
•Mutton = 116%
•Milk = 92%
Year

Source: Malaysia Department of Veterinary Services

CONSUMPTION & PER CAPITA CONSUMPTION IN MALAYSIA

Commodity Beef Milk Mutton

Per
Consumption Per Capita Consumption Per Capita Consumption
Parameters Capita
M. Ton Kg Mil. Litres litres M. Ton Kg •Total consumption for milk
2000 110,593 4.75 1,050.16 45.14 13,889 0.64 industry increased from 1,050
2001 120,270 5.01 1,346.43 56.07 15,798 0.66 litres (2000) to 1,300.47 litres
2002 124,020 5.06 1,268.64 51.73 14,674 0.60
(2004).
2003 129,647 5.18 1,279.45 51.08 12,573 0.50
2004 148,546 5.81 1,300.47 50.84 15,072 0.59
•Average per capita
2005 138,980 5.32 895.06 34.26 16,973 0.65
2006 146,373 5.49 975.81 36.63 17,800 0.67
consumption for 8 years
2007 148,846 5.48 1,067.13 39.27 18,600 0.74 analysis :
2008 (P) 150,696 5.43 1,155.53 41.67 19,511 0.76 •Milk – 50.83 litre/year
•Beef – 5.94 kg/ year
•Mutton – 0.72 kg/ year
30
Livestock Self-
Sufficiency 25
Level in 20
SSL (%)

Malaysia
15
(2000 – 2008) Beef • Average Self-Sufficiency level
10 Milk for those sectors are :
Mutton
5 •Beef – 22.25%
0 •Milk – 4.08%
2000 2001 2002 2003 2004 2005 2006 2007 2008 •Mutton – 9.49%
(P)
Year

Source: Malaysia Department of Veterinary Services

LIVESTOCK PRODUCTION, CONSUMPTION, PER CAPITA CONSUMPTION AND SSL IN
SABAH

12,000
• Beef consumption has
10,000
1990 38.67 increased by more than
1991 41.03 80% and during the same
8,000 CONSUMPTION 1992 37.68 period, the SSL is reduced
(MT)
1993 32.06 to 21.2% in 2008 from
6,000
PRODUCTION 38.7% in 1990.
(MT)
1994 32.69
4,000 1995 37.99
PER CAPITA
CONSUMPTION 1996 15.00
2,000 (KG)
1997 12.00

0
1998 15.00
1999 13.00
2000 11.00
2001 12.00
Source: Malaysia Department of Veterinary Services
2002 6.00
2003 8.00
2004 9.00
2005 15.00
2006 19.97
2007 21.47
2008 21.19
MILK PRODUCTION, CONSUMPTION, PER CAPITA CONSUMPTION AND SSL IN
SABAH

PRODUCTION CONSUMPTION
PER CAPITA •Milk production in Sabah has been
YEAR CONSUMPTION SSL %
(MIL. LITRES) (MIL. LITRES) increasing progressively by more than
(LITRES)
1990 2.68 7.88 5.30 34.13
250% within the last 18 years.
1991 3.20 8.06 4.30 39.68
1992 3.47 8.80 4.60 41.35 • From 2.68 mill litres in 1990 to 9.57 mill
1993 3.89 8.20 4.20 47.00 litres in 2008.
1994 4.60 9.40 4.60 48.47
1995 4.90 11.80 6.01 41.00
•The SSL increased from 34% in 1990 to
1996 4.02 18.76 7.00 24.00
1997 4.40 20.44 8.00 22.00
93% in 2008.
1998 4.42 10.84 3.90 41.00
1999 4.64 11.15 3.90 42.00 •This indicates a positive growth in the
2000 4.99 11.69 4.80 43.00 dairy farming industry in Sabah as a result
2001 4.88 12.44 4.60 38.00 of the priority that has been given to the
2002 5.31 6.27 4.60 85.00 development of the dairy sub-sector
2003 5.82 6.76 1.80 86.00
during the Second Sabah Agricultural
2004 5.86 16.20 5.70 49.00
2005 6.98 7.99 2.70 87.40 Policy period (1999 – 2010).
2006 8.31 8.50 2.76 97.00
2007 9.35 9.6 3.13 97.40 An opportunity for Sabah to be the main
2008 9.57 10.26 3.19 93.27 exporter to Peninsula Malaysia, Brunei
Source: Malaysia Department of Veterinary Services
and Singapore
COMMERCIAL DAIRY FARMS IN SABAH, 2008
Commercial Dairy Farms in Sabah, 2008
MILKING CALVES
NO NAME
COW MALE FEMALE
Stesen Pembiakan Ternakan
1
Sebrang, Keningau NA NA NA
•Tables provide the lists of
Stesen Pembiakan Ternakan Batu commercial and medium-
2
16, Tawau NA NA NA scale dairy farms that have
3 Desa Cattle Sdn. Bhd. NA NA NA contributed to milk
4 Yap Yun Fook 956 438 410 production in Sabah.
5 Gerald R. Baxter 116 59 51
6 Badai Persada Sdn. Bhd. 108 34 20
TOTAL 1180 531 481

Medium-Scale Dairy Farms in Sabah, 2008

MILKING CALVES
NO DISTRICT NAME
COW MALE FEMALE
1 Keningau Asinah Mohd Kadis 50 10 5
2 Keningau Peter Liew 60 30 20
3 Tenom Dixon Sdn. Bhd. 89 3 9
4 Tenom Pao Chun Sai 67 14 16
5 Kudat Vun Shen Min 89 79 42
6 Kota Marudu Chung Kon Loi 95 8 9 Sources: Department of Veterinary
Services and Animal Industry, Sabah
7 Tuaran Ridzuan Wan Hj Lassim 90 29 28
(DOVSAI) / Persatuan Penternak
8 Tawau Lai Sui Yen 50 11 14 Tenusu, Sabah
TOTAL 590 184 143
SMALL SCALE DAIRY FARMS IN SABAH, 2008
NUMBER OF CALVES (HEADS)
DISTRICT FARMERS MILKING COW MALE FEMALE
(PERSON) (HEADS) •The Sabah Dairy
Keningau 20 516 189 144 Programme has also
Tenom 12 302 114 109 developed more than 80
Kudat 5 132 9 46 dairy farmers across the
Kota Marudu 8 162 50 55
state which houses
Kota Belud 1 27 16 9
approximately 1,800
Tuaran 8 13 2 3
Ranau 3 11 2 6 milking cows .
Papar 5 115 26 19
Bongawan 2 50 15 10 •Keningau and Tenom
Membakut 5 121 49 42 districts have the most
Beaufort 3 65 27 15 numbers of dairy farmers
Menumbok 2 31 20 9 compared to other
Tawau 8 270 57 81 districts
TOTAL 82 1815 576 548
Sources: Department of Veterinary Services and Animal Industry, Sabah (DOVSAI) / Persatuan Penternak Tenusu, Sabah
MILK PRODUCTION IN VARIOUS DISTRICTS AND THE EX-FARM VALUE OF
RUMINANT ACTIVITIES
Milk Production in Various Ex-Farm Value of Beef and
Districts of Sabah (Jan-Oct 2009) Milk Produce, RM Million (1999-2007)
MILK
YEAR BEEF MILK
DISTRICTS PRODUCTION 1999 8.87 6.96
(LITRES) 2000 7.52 7.48 •The beef sub-sector has
Keningau 2,197,906.30 2001 6.79 7.12 increased from RM8.9
2002 5.59 7.97
million to RM21.3
Tenom 870,565.00
million, while the dairy
Kudat 378,054.00 2003 4.70 8.74
sub-sector from RM7
2004 16.50 9.00
Tawau 394,589.00 million to RM14 million.
2005 18.00 10.47
Kota Marudu 405,653.00 2006 19.00 12.46 •The ex-farm value of
Tuaran 142,343.00 2007 21.34 14.00 ruminant industry is
Bongawan 89,948.00 approximately RM35
Ranau 32,993.68 million
Beaufort 136,791.00
Keningau is the dairy
Penampang 31,118.00
centre in Sabah as it
Menumbok 20,886.00 produced 2.2 million
Membakut 125,429.00 litres or 44% of the total
Papar 128,787.00 production of about 5
Kota Belud 43,283.00 million litres
TOTAL 4,998,345.98
Sources: Persatuan Penternak Tenusu, Sabah
IMPORT AND EXPORT OF LIVESTOCK PRODUCTS IN SABAH

IMPORTATION
Import of Livestock and Livestock Products, Sabah (1990-2005)
Livestock Products Live Animals
Commodit Beef Milk and Milk Cattle for Cattle for • The total import value increased
y Products Breeding Slaughter from RM78.25 million in 1990 to
Unit M. CIF CIF Heads CIF Heads CIF
Mil. RM211.66 million in 2005.
Ton Value, Value, Value, Value,
RM Litre RM RM RM
mil mil mil mil • The import of beef increased from
1990 2,305 16.72 8.46 48.33 260 1.04 11,443 13.20 2,300 metric ton valued at RM16.72
1991 2,249 16.21 8.80 51.51 663 0.5 11,087 12.90 million in 1990 to 7,015 metric ton
1992 2,375 15.05 10.66 56.14 902 2.4 10,167 11.40 (RM45.863 million) in 2005.
1993 3,253 14.40 8.91 56.75 629 2.06 7,677 9.55
1994 3,118 21.52 11.65 68.81 674 2.425 7,998 11.68
1995 3,583 19.14 14.38 75.39 931 2.987 8,759 11.65
• The import of milk and milk
1996 4,256 22.53 26.12 150.81 NA NA NA NA products has also increased from
1997 5,503 28.67 26.04 154.48 NA NA NA NA 8.46 million litres, 1990 (CIF Value
1998 4,052 25.76 23.00 145.29 601 3.867 541 0.72 RM48.33 million) to 27.41 million
1999 4,401 28.60 24.00 152.05 1,816 6.472 333 0.56 litres, 2005 (CIF Value RM165.798
2000 5,700 33.25 26.00 162.12 0 0 703 4.43
million).
2001 3,788 22.96 26.00 133.50 1,073 4.77 0 0.00
2002 4,309 26.77 26.11 141.67 1,061 3.924 75 0.35
2003 9,685 31.41 9.12 73.80 882 3.785 0 0.00
2004 2,189 13.30 9.16 126.42 788 3.227 0 0.00
2005 7,015 45.86 27.41 165.80 2,584 9.721 0 0.00
Source: Department of Veterinary Services & Animal Industry, Sabah (DOVSAI)
EXPORT OF LIVESTOCK PRODUCTS FROM SABAH

•The export of beef increased from 0.03 metric ton in 1992 to 37.88 metric ton in
2005.

• From 1992 to 2005, the export of milk and milk products increased from 0.32
million litres (CIF Value RM0.8 million) to 0.65 million litres (CIF Value RM3.559
million).

•The highest export value for milk and milk products was in 2004 in which
3.8 million litres was exported (CIF Value RM8.081 million).

•The highest export of cattle for breeding was in 1999 with 65 heads (CIF
Value RM0.265 million) while the highest export of cattle for slaughter was
in 1994 with 120 heads (CIF Value )

Source: Department of Veterinary Services & Animal Industry, Sabah (DOVSAI)

GOVERNMENT POLICIES
 GOVERNMENT POLICIES
SECOND SABAH AGRICULTURE POLICY, (1999 – 2010)

• Roles of livestock industry : Providing food protein for local consumption

& for the development of agro-industries in the rural area.
• Policy for livestock thrust :
• To increase production to ensure adequate supply of high quality
livestock produce and products for local consumption.
• acts as import substitute and
• to capitalize on the export markets.
• The production of livestock will be encouraged to ensure adequate and
consistent supply of raw materials to promote the development of a
livestock processing industry.
 GOVERNMENT POLICIES
SABAH DEVELOPMENT CORRIDOR BLUEPRINT (2008 -2025)

The SDC programmes are underpinned by three key principles that will guide
development in Sabah, namely the need to:
• Capture higher value economic activities
• Promote balanced economic growth with distribution
• Ensure sustainable growth via environmental conservation
• For the ruminant livestock sector,
SDC will:
•Enhance the Nabawan and East
Coast livestock clusters with
development of common facilities
such as abattoirs, storage facilities
and feedlot centres.
•Develop Keningau Integrated
Livestock Centre
•Optimise the surrounding land to
cultivate corn to reduce the reliance
on imported feed.

Source: Sabah Development Corridor Blueprint (2008)

 GOVERNMENT POLICIES

5 MAIN STRATEGIES IN THE NATIONAL MEAT POLICY

1) Increase the base population with suitable ruminant animals for

sustainable and economic production
2) Increase the competitive capacity of the ruminant industry
3) Improve the business environment, infrastructure and incentive
schemes
4) Strengthen sanitary and phytosanitary measures
5) Improve product quality and production of value-added products
 GOVERNMENT POLICIES

MACRO TARGET

Livestock Production for Sabah’s Macro-Targets

PRODUCTION TARGETS
Commodities 2004 2005 2006 2007 2008 2009 2010
Beef (MT) 2,248 2,678 3,481 4,306 5,367 6,572 7,830
Mutton (MT) 49 67 95 131 175 231 301
Fresh Milk (Mil. Litre) 8.46 10.05 14.59 17.35 20.5 24.69 28.77
Egg (MT) 36,538 37,634 38,763 39,926 41,124 42,360 43,630

Source : Balance of Trade Micro Plan Livestock Sector, DOVSAI (2004)

The ex-farm value of the livestock commodities is targeted to reach RM1.2 million
per year and the import value will be reduced from RM269 million in 2000 to RM52
million by 2010, with a reduction of 80.5 % from the import value of year 2000.
SITUATIONAL ANALYSIS
SWOT ANALYSIS
SWOT Analysis of the Livestock Production Cluster

STRENGTHS WEAKNESSES
i.Available land for farm set up and pasture i.Difficulty in sourcing for quality and suitable
development breeders
ii.Available plantation land for crop-livestockii.Poor application of Good Husbandry Practices
integration iii.Low level of animal husbandry and management
iii.Deliberate Government Plan to develop KILC skill/knowledge
within the Sabah Development Corridor iv.Increasing cost of feed and feed ingredients
Blueprint v.Small base population of ruminant animals

iv.Sabah as a FMD-free region

OPPORTUNITIES
i. Sabah as a FMD-free region can be exploited as
source of importation to neighbouring
regions/countries
ii.BIMP-EAGA sub-region as a source of feed and
feed ingredients
THREATS
i.Lower price of imported live animals for
slaughter and meat product.
ii.Relatively limited number of breeding stocks
suitable from traditional imported sources for
local/tropical environment
 SITUATIONAL ANALYSIS
COMPETITIVE ADVANTAGE ANALYSIS (MICHAEL PORTER’S DIAMOND MODEL)
FIRM STRATEGY/ INDUSTRY STRUCTURE
• Dominated by small-scale farms
• Marketing structure not well defined
CHANCE
• Leverage on planned and
existing infrastructure and
programmes

FACTOR CONDITIONS DEMAND CONDITIONS

• Land availability for farm set-up and • Increasing per capita consumption
pasture development • Increasing standard of living
• Plantation land available for crop- • Increasing demand
livestock integration
• Relatively low cost of labour

GOVERNMENT
RELATED AND SUPPORTING INDUSTRIES
Strong animal health and
• Feed mill
production services
• Biofertilizer
R&D activities
• Veterinary supplies & services
Support for poverty eradication
• Financing
programs
• Slaughter house
Disease Free Zone
• Meat shop/ retailers
• Marketing
• Logistic/ Refrigerated trucks
 SITUATIONAL ANALYSIS

KEY SUCCESS FACTORS TO ENHANCE SABAH LIVESTOCK INDUSTRY

• Increasing Breeder Population For Sustainable And Economic

Production
• Increasing Competitiveness in Ruminant Livestock Industry
• Strengthening Support Services
• Encouraging New Technologies and Innovations
• Strengthening Marketing System
• Encouraging Private Sector Participation
• Cost Minimization
CONCEPT AND FRAMEWORK OF KILC
THE LIVESTOCK PROJECT: STRUCTURAL CHART

FEDERAL/
STATE/ EPU

Key Success Factors: District

•Good farm layout and Action Council
design
•Good farm & management Implementing
practices
•Suitable breed Agency (SPV)
•Quality breeder animal &
feeder stock
•Quality & low-cost feed

Buffer
• Planned development New
•Good marketing strategy Village
•Team of experts
•Commercial Scale Zone
•Good risk management plan Livestock Industry
Main Components:
• Main Agri Zone
• Community Agri Zone (Buffer Zone)
• Resettlement Zone (New Village)
• Organisational Linkages
• Lead Agencies Oil Palm
Rubber
Livestock Industry 28
Relationship Matrix- Agropolitan Project

Oil Palm

Livestock Centre

Rubber

Livestock Industry 29
 CONCEPTUAL OF KILC- 3 TIER SYSTEM
The development of a structured breeding program is crucial in the context of the development of a
sustainable ruminant industry. As such, the three-tiered formation of Nucleus, Multiplier as well as the
Commercial herds will have to be established.

The rationale behind the creation of this 3-tier structured breeding system lies in the fact that the nucleus
herd which is the apex of the structure, houses the best quality animals for a certain set of production traits
such as growth. (It is possible that even production system such as organic production system will involve
selection of hardy animals which are “browsers” in terms of feeding habits). These animals are selected and
bred systematically through natural or artificial breeding techniques.

Entrepreneurs or agencies with land banks form the multiplier herds which are at the second tier in the
production structure. Animals for this group are basically obtained from the nucleus in order to ensure quick
and widespread improvement across the tier by continued multiplication. Commercial herds derive their
animals from the multiplier herds and the animals are produced for the slaughter market. Once established,
the breeding system will provide the ruminant population required to start and develop the industry in
Sabah.
 CONCEPTUAL OF KILC- 3 TIER SYSTEM

Genetic Role : Upgrading of genetic level

Outsourcing ABC/CPT of dairy cattle
(Breeder animal, (Breeder
Semen & animal,
NUCLEUS Selected sires & Main Produce / Products:
embryo) Semen &
Herd (KILC) Replacement heifers embryo) - ‘pure bred’ heifers
AI & MOET - ‘pure bred’ bull
- Genetic material (semen)
- Milk
Role : Multiplication of
offspring of KILC Nucleus Herd
MULTIPLIER Production of commercial dairy
Herd heifers
(MIRPC, Sook)
Main Produce / Products:
- Heifers
- Beef breeders
- Milk

COMMERCIAL Role : Production of feeder

Herd cattle for beef/ feed lotting

(Production of meat & milk) Main Produce / Products:

- Beef cow
- Feeder cattle
 CONCEPTUAL OF KILC- 3 TIER SYSTEM

The implementation of a state-wide expansion plan will take a business commercialization approach. This will involve the
3-Tier Livestock Development Framework as well as supporting primary industries and downstream processing industries
for the cluster. The whole industry will be private sector-led in the form of a Special Purpose Vehicle (SPV) formed by
multiple corporate stakeholders. Its main function is to establish a business framework for the ruminant industrial cluster in
the supply chain, from the upstream activities until the marketplace.
Business Cluster
R&D CENTRE

NUCLEUS
HERD/
BREEDING
CENTRE
FEED

EXTENSION/
TOT/ MULTIPLIER
TRAINING HERD
CENTRES
VET
SUPPLIES

COMMERCIAL
FARMS

BIO-
LIVE SALE ABATTOIR
FERTILIZER

TANNERY/
HIDE
PROCESSING

MEAT RETAIL MEAT

RESTAURANT
OUTLETS PROCESSING

33
 CONCEPTUAL OF KILC- 3 TIER SYSTEM

The development of the ruminant industry is best described in a supply chain format. Upon successful establishment of the R&D and Nucleus herd, the centre will supply
high quality animal stock to the Multiplier herd which in turn will supply to the commercial farms. At the same time, the R&D and Nucleus Centre will provide extension and
training services to the Multiplier and Commercial farms. In order to develop the industry, a structured plan of replicating the Multiplier farms and Commercial farms
throughout the state based on location suitability, available carrying capacity and targeted animal population will be put in place. At this point, potential business partners and
anchor companies need to be identified. This will be complemented with development of supporting industries such as production of livestock feed, vaccines supplies and
other primary processing facilities such as milk collection and processing centres and abattoirs. Apart from that, downstream processing activities will also be identified based
on market demand to complete the clustering of the ruminant industry. The finished products will be in the form of dairy products (fresh and processed), live animals and meat
i.e. carcass, cuts and other processed meat products. To support these activities, additional infrastructure as well as upgrading of existing facilities need to be undertaken, as
and when needed. In addition, market channels need to be assessed and best fit will be selected for both the domestic and export markets. The logistical network for the
whole industry will have to be looked into closely to ensure efficient movement of live animals, supplies and finished products to and from the market so that the ruminant
industrial cluster can be created and developed in a viable and sustainable manner.
Logistics
Logistics - Products
 Milk – Milk run
 Meat – Reefer (frozen/chilled)
 Semen
Specialized Vehicle
 Embryo
Logistics – SME By Products
 Cottage industry products :
 Tannery
 Cheese
 Butter
 Yogurt
 Etc..
Logistics – Feed
 Transportation of feed to the feedlot from the feed
mill.
 Packed
 Unpacked

 Specialized Vehicle - Mixer

Logistics - Issues
 Cost of inbound
 Cost of forwarding and handling
 Cost of feed
BUSINESS MODEL
 STRATEGIC STATEMENTS
VISION
•KILC – NUCLEUS to be the premier breeding centre for dairy and beef cattle in
spearheading Sabah cattle industry in a sustainable and competitive manner

MISSION
•To produce top quality dairy and beef breeders for the development of Sabah
cattle industry
•To upgrade the quality of breeders as top producers of milk

OBJECTIVES
•To be the primary producer of heifers
•To be the producer of semen
•To be the model dairy farm

TARGETS
•At full capacity level, KILC- Nucleus will have:
•2,000 heads of cows
•80% milking animals (1,600 heads)
•An average of 12 liters of milk production per cow/day from 2013
onwards
 DEVELOPMENT MODEL

BEEF & DAIRY BEEF VALLEY

BEEF/
INDUSTRY FEEDLOT
1. LOCAL FARMS
CONSUMPTION
2. REDUCE
IMPORT
MULTIPLIER
3. INCREASE
EXPORT
4. INCREASE
EMPLOYMENT DAIRY NUCLEUS
NUCLEUS
5. INCREASE NO. FARMS
OF AGRO-
ENTREPRENEURS
HERD DEVELOPMENT AND PRODUCTION OUTPUT
KILC-
NUCLEUS

BULL HEIFERS
80 2,000

MILK CALVES
5.21 MILL. 1,520
(80% CALVING RATE;
LITRES 5% MORTALITY)

50% MALE 50% FEMALE

760 760

20% 70%
5% BULL 30% HEIFER
75% FATTENING PERFORMANCE MULTIPLIER
REPLACEMENT REPLACEMENT
570 TESTING HEIFERS
38 228
152 532

30% SEMEN
70% CULLED PRODUCTION
106 45

TO SEMEN TO
BEEF 36,000 STRAWS/ MULTIPLIER
VALLEY YEAR FARM
 MARKETING AND MARKET STRUCTURE

•In 2008, the milk production of the Dairy Cattle farmers under
DOVSAI is 9.57 million litres
• A self- sufficiency level of 93% has been met by this production.

Existing Components of Sabah Dairy Supply Chain

SUPPLY CHAIN OF SABAH DAIRY INDUSTRY

1) Dairy farm can be divided into 3 categories :

Sizes of Sabah Dairy Farms In 2008:
• 3,585 milking cows :
Category No of Milking Cows No. of Farmers • 1,180 (33%) from
1 Commercial Farm >100 6 commercial,
2 Medium-Size Farm 50-100 8 •590 (16%) from medium-
3 Small-scale Farm <50 82 scale
Total 96 • 1,815 (51%) from small-
scale farms.
2) Milk Collection Centres

 There are 14 milk collection centres supervised under DOVSAI.

Main function of MCC is to facilitate collection, quality control, storage and

transportation of liquid milk to a processing centre , Sabah International Dairies Sdn Bhd,
(SID)

 Current milk prices according to the grades :

Government Price payable to

Price
Grades Subsidy farmers
(RM/litre)
(RM/ litre) (RM/ litre)
1 A RM1.50 1.00 2.50
2 B RM1.35 1.00 2.35
3 C RM1.25 1.00 2.25
 PRODUCT RANGE

200ml UHT packet

Contract milk for the Sabah
packing of UHT Milk Programme;
products for
other 200ml UHT packet
commercial milk for the
companies. Yayasan Sarawak
School Milk
Programme;

Export Bulk PRODUCT

milk to RANGE
Peninsular
200ml UHT packet
Malaysia
milk for the
National School
Milk Programme

Contract packs
Commercial market
pasteurized fresh
under the brand
milk and UHT
name of ‘Daily Dairy’
products
 PRICE STRUCTURING AND LOGISTICS
Products Retail Price Marketing Structure and Transportation flow :
Local Products
Fresh Plain, Full Cream,1 litre RM3.45 10 to 30
Farm
Fresh Plain, Less Fat, 1 litre RM3.70 minutes of
travelling
Fresh Flavoured, 1 litre RM3.45 time
UHT flavoured , 1 litre RM3.00
Milk Collection
Producer
Imported
Centre Level
UHT full cream
UHT full cream flavoured RM4.60-RM5.70
Evaporated Milk (410 g) RM4.90-RM6.00 Processing
Condensed Milk (400g) RM2.60-RM2.80 Centre, SID
0.5 to 10 hours
Milk Powder, full cream, RM2.40-RM2.75 minutes of
travelling time
(600g) RM13.70-RM15.70
Butter (250g) RM10.00-RM16.00 Consumer in
Kota Kinabalu
Consumer
Cheese, Cheddar, (250g) RM10.00-RM11.50 Level
FINANCIAL PROJECTION
 CASH OUTFLOW
a) Capital Expenses: government funded / grant
b) Overhead and Operational Expenses – from private / GLC sector
participation
 CASH INFLOW

The first stream of income will begin in 2011 from the sale of a small amount of fresh milk (68,400
litres) and feed (1,470 mt), contributing RM1.35 million of cash inflow. The income stabilizes from
2013 onward with an annual income of more than RM20 million. A portion of feed and semen
(which is produced beginning from 2013) is used internally.
70,000,000
PROJECT 10 YEAR CASHFLOW
60,000,000

50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

-10,000,000

-20,000,000

NET CASH INFLOW CASHINFLOW CUMMULATIVE NET CASH INFLOW

PHYSICAL PLAN
3D VIEW
PROJECT CONCEPTUAL PLAN
ZONING PLAN
OVERALL DETAIL LAYOUT PLAN
LAYOUT FOR MILKING AREA

Illustrations for Milking Area

LAYOUT FOR WORKERS
HOUSE
LAYOUT FOR LOADING AND
UNLOADING AREA

Illustrations for Loading and Unloading Area

LAYOUT FOR BREEDLOT
 Investment Required
The total project cost for the KILC Nucleus Breeding
Centre is approximately RM108.5 million, consisting of
expenses for infrastructure and asset acquisition, and
overhead and operating expenses required in 2010-
2013.

The cost breakdown is provided in the following Table.

 Breakdown of Total Project Cost
No. Expenses Total (RM) % of Total Source of Fund

1. Infrastructure, Buildings and

Asset (Machinery/ Equipment) 74,115,287 68.29% Government Grant
2.
Overhead Expenses (2010-2013) 21,395,198 19.71% Project Operator
3.
Operating Expenses (2010-2013) 13,015,813 11.99% Project Operator

TOTAL: 108,526,298 100.00%

 Special Purpose Vehicle (SPV)
 KILC will be implemented as a commercial, private
sector-led project.

 The SPV will be formed to manage and operate the

KILC and to establish a business framework for the
development of the livestock industrial cluster in
Sabah.
 Investment Opportunities
 As a shareholder in the proposed SPV
 Investment in Multiplier Farms
 Investment in Commercial Farms
 Participation in Other Supporting Business Activities
 Production of total mixed feed and feed supplements for
ruminants
 Consultancy services
 Veterinary drugs, equipments and other supplies
 Animal slaughtering and downstream processing
 Animal waste management to bio-fertilizer production
 Marketing and distribution to wet markets and supermarkets
 CONCLUSION
 The objectives of KILC are to increase Sabah production of milk, enhance the
income of dairy farmers and increase the sustainability of dairy industry.
 KILC, as an initiative by SEDIA, is proposed to be based on the three-tier
breeding system, which will overcome the problem of insufficient numbers
and low quality of breeding stock
 KILC involves the complete value chain of milk and beef production which
consists of Nucleus Farm, Multiplier Farm and Beef Valley, and consequently
up to the market level.
 KILC will produce approximately 6 million litres of fresh milk, 500 high quality
dairy breeding stocks and 36,000 straws of semen annually beginning from
2014
Contact Information

Institute for Development Studies (Sabah)

Tel No: 088-450500

Azaharuddin Bin Hassanuddin

Technical Advisor
azaharuddin@ids.org.my

Azmir Ramli
Research Associate
azmir@ids.org.my