Prices of dairy products likely to remain firm on higher demand

A spurt in demand for dairy products amid an almost stagnant milk output in the last one year has led to tight supply situations and elevated prices, industry experts said, and warned that rates may remain firm this summer.

The Centre, along with National Dairy Development Board (NDDB), is monitoring the supply-demand gap in dairy products and will take a decision on imports depending on the situation.

India is the world's largest milk producer. The output stood at 221 million tonne in 2021-22, up 6.25 per cent from 208 million tonne in the previous year. However, the production in 2022-23 is estimated to remain flat or witness slight growth.

Also Read | India may consider dairy products' import on tight supply amid stagnant milk output: Govt

While announcing the monetary policy, RBI Governor Shaktikanta Das on Thursday said, "milk prices are also likely to remain firm going into the summer season due to tight demand-supply balance and fodder cost pressures".

The RBI governor had also pointed out that consumer price inflation has increased since December 2022, driven by price pressure in cereals, milk and fruits.

When contacted, Mother Dairy Managing Director Manish Bandlish said, "The dairy sector is going through an unprecedented time. There is a consistent surge in demand of milk and milk products, at the same time, the procurement prices of raw milk are also increasing significantly."

Moreover, he said the erratic climatic conditions are impacting the availability of feed and fodder, pushing up input costs and subsequently raw milk prices.

"Furthermore, the overall flush season was not as anticipated, so the inventory level of commodities in the country is low," Bandlish said.

Going ahead, he said, the progression of the monsoon along with the availability of feed and fodder will be the deciding factor for the prices.

Bandlish said the company is closely monitoring the situation at hand and will ensure that the markets are adequately fed.

President of Indian Dairy Association (IDA) R S Sodhi said the government is seized of the matter.

"In case the government decides to allow imports, we are hopeful there will be no impact on the prices farmers get for the milk they supply," he said.

Major milk cooperatives like Amul and Mother Dairy raised retail prices by Rs 2-3 per litre in two and three spells since September 2022, followed by other state cooperatives, attributed to increase in feedstock costs.

On Thursday, Ministry of Fisheries, Animal Husbandry & Dairying noted that "this is a fact there has been some demand and supply gap observed in the dairy sector- primarily due to increased demand for nutritious, safe and hygienic milk and milk products post COVID-19 pandemic."

It also mentioned that there were demands from several dairy cooperatives for import of conserved dairy commodities -- milk fat and powder.

Their demand for import is in view of the growing consumption of dairy products and also the fact that supply of milk in the ensuing summer (being a lean season) may be less.

"With this background, NDDB along with Government of India has been monitoring the demand-supply situation. Since the process of import takes time, the necessary back-end processes are being put in place to timely manage the situation in case of any eventuality," the ministry said.

In case the situation warrants, the government said the import may be done to help ease out the situation for dairy cooperatives to meet the summer demands.

However, it will be ensured that it is routed only through NDDB and the needy Unions may be given the stocks at the market price after proper assessment.

Earlier this week, Animal Husbandry and Dairy Secretary Rajesh Kumar Singh had said, "The impact of lumpy skin disease on cattle can be felt to the extent that the total milk production is a little stagnant. Normally, milk production has been growing at 6 per cent annually. However this year (2022-23), it will be either stagnant or grow at 1-2 per cent."

Since the government takes into account the milk production data of the cooperative sector and not the entire private and unorganised sector, "we assume it will be stagnant," Singh had said.

The domestic demand grew 8-10 per cent in the same period because of a rebound in the post-pandemic demand.

"There is no constraint in milk supply as such in the country...There is an adequate inventory of skimmed milk powder (SMP). But in the case of dairy products, especially fats, butter and ghee etc, the stocks are lower than the previous year," the secretary had said.

The government will intervene to import dairy products like butter and ghee, if required, after assessing the stock position of milk in southern states, where the flushing (peak production) season has started now, he had said.

The shortage will be less in North India where the lean season has been postponed with temperature cooling down due to untimely rains in the last 20 days.

India last imported dairy products in 2011.