India is grappling with rising milk prices and is not expected to ease until November.
Matthew Lloyd | Bloomberg | Getty Images
India, a world dairy powerhouseis facing an increase in milk prices and is not expected to ease until November.
“In the last 15 months, this has happened [an] an extraordinary increase in milk and milk products, around 14 to 15%,” said RS Sodhi, former managing director of India’s number one dairy company, Gujarat Cooperative Milk Marketing Foundation.
The increase in prices is due, among other things, to higher feed costs, increased demand for ice cream and contagious livestock diseases.
India, the world’s leading producer of milkit accounts for 22% of global milk production, followed by the US, China, Pakistan and Brazil.
Milk prices in India rose from 46 rupees to 53 rupees per liter (between $0.55 and $0.64) from November 2021 to early May, according to data provided by food commodity price database Mintec.
This is an economic squeeze for Indians who are the largest consumers of milk in the world.
“In India, every household buys milk every day. Per capita consumption is around 440 grams per person per day. Every Indian starts [the day] with milk,” said Sodhi.
“In the morning, people drink milk, from a bottle or in tea and coffee… a lot of Indian desserts are mostly made from milk only,” he added. Other local milk-based favorites include paneer, ghee and yogurt – all of which are staples of the regular Indian diet.
Higher feed costs
Higher cattle feed prices coinciding with periods of peak demand are contributing to a sharp increase in milk prices.
“The increase in feed prices has discouraged farmers from providing sufficient feed to their livestock,” said Matthew Biggin, commodity analyst at Fitch Solutions’ BMI research unit.
India is grappling with rising milk prices and is not expected to ease until November.
Hindustan Times | Getty Images
Cattle feed is commonly formed maize, wheat, rice and oats, among other cereals, according to India’s National Dairy Development Board. Many of these ingredients saw big jumps in the middle of last year and remain at elevated levels. Some of the price increase was partly due to the Russian invasion of Ukrainewhich disrupted supply chains and drove prices up.
In addition to rising feed costs, ranchers also faced higher transportation, storage and energy costs, Biggin said.
Plague and pandemic
Even before the increase in input costs, the dairy sector was reeling under the effects of the pandemic.
“The sector was already under pressure, still feeling the effects of the pandemic where demand has been hit, putting small farms, which form a significant part of India’s dairy sector, under financial pressure and leading to reduced breeding rates,” he added. he said.
A surge in demand for products such as ice cream as the country enters the summer months and then following religious holidays where milk-based sweets are a staple, [alongside] limited domestic supply will continue to support prices throughout 2023.
Matthew Biggin
Commodities Analyst at BMI
Additionally, millions of the country’s dairy herd population were afflicted lumpy skin diseasewhich resulted in blisters and reduced milk production in cattle.
“Lumpy skin disease is estimated to have killed or emaciated more than 300,000 cattle last year, adversely affecting milk production,” said Mintec sub-editor Andrew Woods.
Will prices go down after November?
Milk production in India is “likely to remain under pressure” and increase the country’s dependence on imports, BMI’s Biggin said, especially as the sector enters a period of peak demand.
“The increase in demand for products such as ice cream as the country enters the summer months and then after religious holidays, when milk-based sweets are a staple, [alongside] limited domestic supply will continue to support prices throughout 2023,” he predicted.
Indian Sweets, Mithai, at Chandu Sweets, Teenbatti, Walkeshwar.
Anshuman Poyrekar | Hindustan Times | Getty Images
Diwali, also known as the Festival of Lights, is one of India’s biggest religious festivals and will be celebrated by Hindus, Jains and Sikhs around the world in November. Central to the celebration is the Indian sweet Mithai, primarily made from milk, flour, ghee and sugar.
“This means prices will remain elevated, consumers will be incentivized to substitute alternative products and reduce their consumption, which will help keep more significant increases under wraps,” Biggin said.
Likewise, Sodhi expects prices to go down after Diwali, which falls this November. Milk prices could come down by Rs 2-3 per liter to around Rs 50 per litre, he said.
“After Diwali, prices will stabilize – they may go down, but I don’t foresee a big drop.”
