A cross sectional study was carried out with specific objectives of assessing the relative profitability of smallholder dairy farming and determining the socio-economic factors affecting it, in six of the then nine provinces of Zambia. Data used to achieve these objectives were obtained from 157 smallholder dairy households, which were randomly selected using a multi-stage sampling design and analyzed using descriptive statistics, gross margin analysis and regression analysis. The study was driven by the lack of research-based information in this area despite the involvement of an overwhelming number of donor funded projects and the Government in promoting smallholder dairy farming.

The results indicate an estimated average milk sale price of ZMK 2002.05 per litre, while the estimated average cost of production was ZMK 828.20 per litre. Thus, the estimated gross margin per litre was at ZMK 1173.85, representing 57.9 percent of the average sale price of milk. Findings on econometric analysis of the socio-economic factors indicated that dairy cow herd size and distance travelled to deliver milk to milk collection centers had a statistically significant effect on the profitability of smallholder dairy farming, other factors being held constant.

These results suggest that the Zambian smallholder dairy enterprise is a viable venture and could play an important role in rural poverty reduction, employment and wealth creation, as well as in enhancing household nutrition and food security. However, long distances to the milk collection centers (market), lack of resources and a scarcity of high milk yielding dairy breeds to increase dairy herd sizes are some of the major hindrances to the viability of smallholder dairying in Zambia.

From the above study findings, it is recommended that the Government, donors and other service providers need to allocate more resources towards smallholder dairy development particularly in the areas of animal breeding, marketing, value addition, infrastructure development, water harvesting mechanisms and knowledge transfer. Further projects should also consider constructing more milk collection centers near smallholder dairy farmers in order to reduce the distance travelled to deliver milk to the market.