Commercial dairy farms can be set up near the cities where there is a assured market of milk round the year or in the milk-shed areas of milk processing plants. Nearness to market is important as nearer the market lesser will be the transportation charges and lesser will be the loss due to spoilage of highly perishable milk and milk products during storage and transportation. Ideally the large dairy farms should be located nearer to towns but not in towns itself as in urban areas the conditions are not exactly ideal nor economical for production of milk. Land may not be available or available at high rentals for animal sheds and for fodder production. The producer has to purchase the feed items at higher prices. Yet many city dairy owners earn handsome money as they can sell milk at high prices to the consumers directly often circumventing the middlemen.
The other important requirement for setting up of a successful commercial dairy farm is the land for fodder cultivation. The land should be well fertile with assured irrigation facilities so that all the seasonal fodder crops could be successfully raised and abundant good quality green fodders are made available for animal feeding throughout the year. The place where the dairy farm is to be set up should have a source of good quality fresh water for animal drinking and for the cleaning, washing etc. at the dairy farm.