With more than 80 percent of the milk produced in developing countries coming from small-scale dairy producers, dairying improves food security and represents a source of employment and income to millions of smallholder families. Smallholder dairy production may vary significantly according to the location, agro-ecological zone and socio-economic conditions. Examples include mixed farms in Central America with 25 cattle each, rice farms in the Punjab of India with ten buffaloes each, mixed farms in the highlands of Ethiopia with one or two dairy cows each, and Sahelian pastoralists with herds of up to 100 animals each.

Smallholder dairy production relies heavily on family labour, with occasional use of hired labour. Small‐scale dairying provides jobs along the dairy chain, for example, for small‐scale processors and intermediaries.

The strengths of smallholder dairying are low production costs, high profit margins, low liabilities, limited liquidity risk, and relative resilience to rising feed prices. Weaknesses include limited access to services such as health, credit and training; poor access to markets and inputs, especially feed; scarce capital; and low labour productivity. The viability and profitability of small-scale milk production depend greatly on production costs and the efficiency of the dairy chain. Organized small-scale dairy systems (i.e., with improved productivity and market access) can compete successfully with large‐scale, specialized, capital intensive “high‐tech” dairies.