Soaring cattle feed prices to drive milk prices higher
Retail milk prices that have shot up nearly 22% in three years, including about 10% in the last one year, are expected to increase further in the coming three-four months as feed and fodder prices are on the rise amid the monsoon deluge.
The prices of de-oiled rice bran (DORB), a key ingredient in cattle, poultry, and fish feed, have increased sharply to 18,000-18,500 a tonne from 15,000 per tonne in the last few weeks. Maize, a major feed grain and a standard component of livestock diets, is being sold at 24,500 a tonne in Tamil Nadu’s Erode, a 20% increase in one month, people in the know in the spot trade said.
“The rise in prices is recorded not only in de-oiled rice bran but also in grains. Maize (corn), jowar, bajra prices are also very high due to heavy rainfall increasing moisture content in crops. While the ideal moisture content in maize is around 14%, it has gone up to 18-19%. This raises concerns over crops being infected by fungus, which will eventually lead to damage," said Maharajan Sakthivelayutham, CEO of Krishi Nutrition Co. Pvt. Ltd, an animal feed company.
“Additionally, mismatch in demand and supply, and lower MSP (minimum support price) hike than expected pushed up maize prices," he said.
The northern states were hit with extreme rainfall in the second week of July. The standing paddy crops in Punjab and Haryana were badly hit, thus affecting the supply of rice bran which is used for animal feed, and is a by-product of rice. These two states have seen rainfall in large excess of 96% and 91% above long period average, during 1 June-to 12 July.
“Any natural calamity that raises agricultural prices will eventually lead to higher feed and fodder prices," said Samarth Setia, CEO of Mr. Milkman, a SaaS platform for dairies to manage their operations from production to consumption. “There is already pressure on prices due to floods. Feed and fodder prices are seen to be under pressure and consequently milk prices, despite the fact that production usually increases in winter.
" 48-50 a litre retail price of milk in Tamil Nadu is expected to go up by 2 a litre, while consumers across the rest of India may have to spend 2-4 more per litre, industry experts said.
“Considering the changes in weather and floods, there is a high chance that milk price would increase. The cost of milk production is expected to go up in the next three-four months. The estimation is between 2-4 hike per litre," a dairy industry expert said, requesting anonymity. “When I say a 4-rupee-hike, it will happen in multiple months and multiple iterations. If it is 2, price rise will be reflected in one or two iterations.
" Queries sent to the Consumer Affairs and Animal Husbandry and Dairying ministries remained unanswered till the time of going to the press.
Some experts see a little impact on retail milk price because of the seasonality and demand from consumers getting hit if retail price of milk is increased beyond a level. Rainfall in second half of monsoon season (June-September) will play a key role in prices of feed and fodder, and eventually milk.
“The deluge, which took place in the early part of the monsoon, may delay the arrival of certain crops, but I don’t expect this to cause any material damage so far. However, a marginal increase in prices is expected because everybody has planned for certain months and suddenly, if the material is not available for the planned duration, a supply crunch will emerge," said Sandeep Singh, CEO-animal feed Godrej Agrovet Ltd. “DORB prices have already gone up, and may go up further by 500-1,000 a tonne, but I don’t see an upward inflationary pressure. The rise is expected simply because of the late arrival of crops."
Kharif paddy crops that usually start arriving in mid-October may be expected to arrive in markets from late October or early November due to the deluge, he said. “However, it will depend on how monsoon progresses in August and September."
The heavy rain in the northern states, especially Punjab and Haryana, has submerged standing paddy crops, and farmers are now required to re-sow or re-transplant them. Paddy prices were already rising because of the rainfall deficit. After the heavy downpours, prices of paddy and its by-products like rice bran, have shot up significantly.
“Due to the deluge in some major grain producing areas, crops have been impacted. Other grain crop too may be hit. But, as far as green fodder is concerned, production of these will increase in flooded areas as farmers will pick short-term crops like maize," said Rupinder Singh Sodhi, president of Indian Dairy Association.
“There will be temporary shortage of feed and fodder as grain production ultimately may be less, but green fodder production will be better. Presently, feed cost has shot up because people realise that paddy production will be less."
Though feed prices are expected to remain high, the price of milk is unlikely to rise as it has increased a good 15-16% in the last one and a half years. Consumer demand will crash if prices are increased beyond a level.