No spike seen in milk prices till middle of next year

Retail milk prices, which was increased a number of times last year, is unlikely to witness any spike in prices till middle of next year because of improvement in supplies since April and setting in of ‘flush’ season, a senior official with Mother Dairy, the major milk supplier in the Delhi-NCR region said

“Since April, the milk supplies has improved and I can’t foresee any increase in milk prices in the next six to eight months,” Manish Bandlish, Managing Director, Mother Dairy Fruit & Vegetable Pvt. Ltd, a wholly-owned subsidiary of National Dairy Development Board (NDDB), told FE.

We are not sensing the need to increase milk prices because of improvement in supplies,” Jayen Mehta, Managing Director,  Amul said at the ‘Idea Exchange’ programme of Indian Express on Friday.

The milk supply situation has drastically changed this fiscal while the situation was grim earlier and most of the dairy companies were struggling on commodities especially fat (ghee) and there were discussions on the possibility of some imports of dairy products, Bandlsh said.

He said that there has been some inflation in the feed cost, which constitute about 65% to 70% of the cost of production of milk because of rise in maize prices because of increasing alternative use of the grain. Currently the cattle feed cost is around Rs 22-23/kg which ideally should be in the range of Rs 18-19/kg which would reduce farmers stress.

A combination of high cost of feed and raw material, and supply challenges, lumpy skin disease (LSD) and rising dairy exports has impacted milk production and costs, leading organised players, including Mother Dairy and Amul, to hike milk prices atleast five times last year.

Retail milk inflation in September was 6.89%, marginally lower from the previous month.

Milk has the second highest weight in the food and beverages basket of the consumer price index at 6.61%, a notch lower than cereals and products that have a 9.67% weight.

Despite India being the largest milk producer since 1998, the commodity has been the second biggest factor after cereals such as rice and wheat in driving up retail inflation in the last fiscal.

In terms of sales turnover, Mother Dairy has reported a turnover of Rs 14,500 crore in FY23.

While in the last two financial years, the company grew by 16% (FY23) and 20% (FY22) on year, Mother Dairy is expected to grow by around 10% in the current fiscal because of ‘deflation’ in edible oil which has hit earning from sales of Dhara brand of edible oil.

“There has been deflation in the edible oil segment because of drop in prices since last year while the we have witnessed volume growth,” Bandlish said adding that edible oil segment of the company which focused on indigenous mustard, groundnut and soybean oil contribute about 18% to 20% of the annual turnover.

The voume growth of the company has been impacted this fiscal because of bad summer, sales of ice cream and other products such as curd got hit due to rains in April-June, which reduced the consumption, he said.

Overall business, milk and dairy products have a share of more than 70% for Mother Dairy.

Source : The Financial Express Nov 4th 2023