Milk Output Trails Demand as Costs Surge

India’s dairy sector is facing a widening demand-supply gap, with milk production growth slowing sharply to 3.5–3.78%, while demand continues to expand at around 6% annually, creating sustained upward pressure on prices. Retail milk prices have already increased by ₹2–₹5 per litre, with farm-gate prices hitting five-year highs, signalling a deepening structural imbalance.

The slowdown is being driven by rising input costs, particularly a 35–40% surge in cattle feed prices due to fodder shortages, along with climate change impacts that are shortening the flush season and reducing productivity. Packaging costs have also spiked significantly—up to 70% for key materials—amid global supply disruptions linked to geopolitical tensions.

Structural inefficiencies continue to weigh on the sector, with low adoption of quality compound feed (~15%) and a significant gap between feed production capacity and the ~120 million metric tonnes required annually. These challenges are further compounded by quality and compliance issues, with over 57% of dairy export shipments facing rejection due to labeling and documentation gaps, while the European Union has yet to approve Indian dairy plants over stringent standards.

Disease outbreaks such as Lumpy Skin Disease (LSD) have also had a major impact, causing an estimated $2.44 billion loss in 2022–23, affecting milk yields and increasing cattle mortality.

With input costs 10–15% higher than global averages and profitability under pressure, many farmers—especially younger ones—are exiting the sector, leading to labour shortages and reduced innovation. The crisis underscores a long-term structural challenge, as India’s dairy industry struggles to sustain growth amid rising demand and escalating costs.

Source: Dairynews7x7 2 April, 2026 Read full article here

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