Cattle feed cost, logistics, Covid: Why milk prices hit boiling point

Last week, Gujarat Cooperative Milk Marketing Federation, which sells products under ‘Amul’, hiked milk prices by up to 8 per cent, the fifth increase by the country’s largest dairy brand since July 2021. The cumulative increase in one and a half years stands at 17 per cent.

The prices of other brands like Mother Dairy, Nandini, Parag and Kwality have also gone up by a similar extent.

The price of 1 litre of Amul toned milk in Delhi-NCR region has risen from Rs 38 in May 2014 (when Modi came to power) to Rs 46 by June 2021 to Rs 54 on February 3, this year.

So, what is driving the sharp jump in milk prices? Higher input costs from feed to packaging, logistics and the aftermath of the pandemic have all played a role.

The cost of cattle feed has jumped sharply. De-oiled rice bran, a key ingredient in cattle feed, has become costlier by 40-50% in just one year.

The prices of other cattle feed ingredients like corn and soya bean have also gone up sharply.

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“The milk price hike is mainly driven by the increase in prices of cattle feed which impacts production costs,” said Bhupendra Suri, chief executive officer of Godrej Jersey. He added that the primary packing material cost has increased sharply. The price of glass bottles has jumped 23%, pet and plastic film costs have gone up 7-8%. The shift to paper straw from plastic straw has also led to a significant increase in production costs.

Covid disruptions

Milk demand was severely hit during the Covid pandemic period, bringing down prices so low that it was not enough to cover even the cost of feeding and maintaining the animals.

“During the pandemic, the cost of production increased but not the sale price, and farmers incurred losses. They didn’t invest in inducting new animals or feed. This has an impact now on the cost,” said R S Sodhi, president, Indian Dairy Association, and former managing director of Gujarat Cooperative Milk Marketing Federation.

Lumpy skin disease

Milk production was also hit due to the spread of lumpy skin disease (LSD) in the livestock population, which mainly affected cows. Major milk producing states including Uttar Pradesh, Gujarat, Maharashtra, Rajasthan, Punjab, Madhya Pradesh and Uttarakhand were affected by this disease. It led to the death of over 1,00,000 cattle in the country.

The demand for milk and milk products jumped once Covid restrictions ended and the economy revived. Production couldn’t keep pace with this sudden surge, which was also evident in the shortage of butter and ghee, almost disappearing from the retail shelves.

In the wake of the Russia-Ukraine conflict, international prices for milk products soared, making exports more lucrative.

India’s export of dairy products almost doubled to $391.59 million in 2021-22 from $201.37 million in the previous year. The export of dairy products from India stood at $186.71 million in 2019-20.

Despite the recent sharp increases, the industry has still not been able to fully pass on the higher procurement costs, said Suri. “With a rise in milk procurement prices likely in the coming months, we can expect further hikes in prices for consumers in the short to medium term,” he said.

Sodhi said the cost of milk production had increased by 20-30% in the last 15 months while the sale price has increased at a lower pace of 10-15%.