Sri Lanka has a total land area of 65,610 sq. km. Of this, around 2 million hectares or 30 percent is agricultural land.  Almost 75% of the agricultural land is under smallholdings and the balance under estates.  The number of smallholdings is estimated at about 1.8 million and of this 90% are less than 2 ha in extent. About 70% smallholdings solely devoted to crop production, the remaining has a mixture of crops and livestock and in few cases solely livestock .

Based on the rainfall pattern and altitude, the country is divided into three main agro-ecological zones namely, low country, mid country and the hill country, and the low and mid country regions again being divided into a wet zone, an intermediate zone and a dry zone.

The agricultural sector contributes around 16.8 percent of National Gross Domestic Production (GDP). The livestock sub sector contributes around 1.2% of national GDP.

 

There are about 1.5 million cattle, 0.3 million buffalo’s, 13 million poultry 0.08 million pigs in the country with negligible number of sheep, ducks other species. 

Livestock are spread throughout all regions of Sri Lanka with concentrations of certain farming systems in particular areas due to cultural, market and agro climatic reasons.

Dairy sector is the most important of all livestock sub sectors. This is primarily because of the influence it can make on the rural economy. Sri Lanka imports around 65,000 MT of dairy commodities, mainly FCMP, and dairy development is therefore seen as an instrument to replace this large volume of imported commodities and also to generate rural employment. Unlike with pigs and poultry where certain religious and socio-cultural sentiments are seen in promoting the development of such species, dairying is acceptable to all ethnic groups and religious sectors. 

The domestic milk production only constitutes about 17 percent of the requirement and the rest is imported. The import bill on dairy commodities is around 15 billion rupees or approximately 13 Million USD. The government attention is most focused on the dairy sub sector; to develop this sector into a ‘local industry’.  The government policy on dairy development is aimed at producing 50% of country’s requirement of milk by the year 2015.  Priority is therefore given for the dairy development in public sector investment programmes and several incentives offered to the private sector to engage in dairy sector.

The dairy sector is predominantly based on small holders keeping 2-5 cows and their followers in most of the agro-ecological regions except the dry zone. In the dry zone the herds tend to be large, though the animals are mostly of the indigenous types with poor milk yields. The estimated annual milk production in the country is 350 million liters and is produced in all the districts. The districts with a significant milk production are Kurunegala, Badulla,Anuradhapura,Nuwara-Eliya.  

Of the total milk that is available, the volume of milk entering the formal milk market annually is around 100 million liters and the rest is channeled via informal routes and consumed domestically. With the pressure on land for pasture production, the main milk production areas have recently been shifted from the mid and upcountry to the Northwest and North Central provinces. The highest recorded milk collection in 2006 was thus from the Northwestern province with 18.9% of the volume of milk collected. The collection of milk from the traditional milk sources, namely, upcountry and mid country areas in the same year have been 7.1% and 15.7% respectively