Global dairy price crash bringing focus back to Indian dairy market

Next five months will play a crucial role in the Indian dairy sector. This year saw a phenomenal increase in the price of milk and milk products. The farmers also received the best milk prices for the longest duration. India has already exported more dairy products in the first six months of FY 23 than FY 20 and FY 21.

The input costs also saw newer heights with feed and fodder prices zooming up by upto 60%. Similarly, the cost of other inputs like fuel, logistics etc have also increased sharply. This has led to an increase in milk and milk product’s prices, four times this fiscal by the processors. Lumpy skin disease has hit badly and impacted the milk production in some of the states. Excessive rains and storms have also impacted milk production in southern states.

There was an acute milk shortage throughout the year in the country. Except for the largest cooperative , no one else had enough of stocks of SMP and butter in the country. Amul played his role as a big brother and met the local requirements of SMP at reasonable prices.

The dairy processors have moderated milk prices by Rs 2-4 in UP and by Re 1 per Ltr in Maharashtra from 1st of November. The milk availability is improving in the buffalo area . But cow belts in most of the states are still distressed due to LSD.

What do we see from here ?

1. Global dairy prices crashing which may moderate Indian commodities prices also to a large extent

2.Buffalo milk production increasing and thus more conversion of SMP and Butter

3. Poor milk availability in Cow belts and thus firm prices like in Rajasthan

4.Institutional buying to gain momentum from end of November onwards

5. In the wake of very low stocks of butter and milk fat by all the cooperatives, NDDB may import duty free Butter and butter oil for them.

Key learnings from this Diwali

1.Large cooperatives with huge stocks can serve the market on pan India basis and thus control price movements.

2. Private sector dairies with good quality products can also charge high prices for their products.

3. The adulterers may not be able to control the large part of the market in years to come particularly for ghee segment.

4. Private sector dairies have also performed well in exports of value added products like butter fat and Casein.

5. Diwali preparation must not begin from August rather it must start from January onwards. This year most of the SMP sold during diwali was more than one year old.

6. Companies making Khoa could not meet the Diwali demand of the sweet makers.

How will the summer of 23 look like ?

It is a difficult question to answer at this stage. Still I see a much better summer than that of 22. Whenever farmers gets good prices for their produce, they buy more animals and increase milk production in subsequent years. I can only suggest to all the dairy manufacturers that you must focus on your captive requirements of SMP and butter first. USDA has forecasted a total SMP production of 740000 MT in the next year. That will be the highest level ever achieved by India. We need to achieve that number as India will also begin with very low stocks of SMP and butter next year. Next year I also foresee some government policy on building SMP and butter stocks under its Food security responsibility.

No one can underestimate the power of the dairy industry now.

Source : A dairy blog by Kuldeep Sharma Chief editor Dairynews7x7