India is facing an increase in milk prices, and it is not expected to ease until November.
Matthew Lloyd | Bloomberg | Getty Images
India, the the world’s dairy powerhouseis facing an increase in milk prices and it is not expected to ease until November.
“In the last 15 months, there has been (an) extraordinary increase in milk and milk products, around 14-15%,” said RS Sodhi, former CEO of India’s top dairy company, the Gujarat Cooperative Milk Marketing Foundation.
The price increase is due, among other things, to higher feed costs, an increased demand for ice cream and an infectious livestock disease.
India, the world’s leading producer of milkaccounts for 22% of global milk production and followed by the US China, Pakistan and Brazil.
According to data provided by food price database Mintec, 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.
This is a financial squeeze for Indians which is the world’s largest milk consumer.
“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,” says Sodhi.
“In the morning, people drink milk, out of the bottle or in tea and coffee … many Indian desserts are mostly made of just milk,” he added. Other milk-based local favorites include paneer, ghee, and yogurt—all of which are staples in Indians’ regular diets.
Higher feed costs
Higher cattle feed prices coinciding with the peak demand season are contributing to the increase in milk prices.
“A rise in feed prices has discouraged farmers from supplying their livestock with enough feed,” said Matthew Biggin, commodities analyst at Fitch Solutions research unit BMI.
India is facing an increase in milk prices, and it is not expected to ease until November.
Hindustan Times | Getty Images
Cattle feed usually consists of of corn, wheat, rice and oats, among other grains, according to India’s National Dairy Development Board. Many of these ingredients saw big peaks in the middle of last year and remain at elevated levels. Some of The price increases were driven in part by Russia’s invasion of Ukrainewhich disrupted supply chains and drove up prices.
In addition to rising feed costs, cattle farmers must also face higher transportation, storage and energy prices, Biggin said.
Plague and pandemic
Even before the increased input costs, the dairy sector was already reeling from the effects of the pandemic.
“The sector was already under pressure and was still feeling the impact of the pandemic where demand was hit, putting smallholder farms, which form a significant part of the Indian dairy sector, under financial strain and driving a reduction in breeding rates,” he said.
A pick-up 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 in 2023.
Matthew Biggin
Commodity analyst at BMI
In addition, millions of the country’s dairy herd population were plagued by lumpy skin diseasewhich led to blisters and reduced milk production in the livestock.
“Lumpy skin disease is estimated to have killed or emaciated over 300,000 cattle last year, adversely affecting milk production,” Mintec dairy and pork analyst Sandro Schulz said.
Will prices go down after November?
India’s milk production is “likely to remain under pressure” and increase the country’s import dependence, BMI’s Biggin said, especially as the sector enters peak demand season.
“An increase in demand for products such as ice cream as the country enters the summer months, and then the following religious holidays where milk-based sweets are a staple, (alongside) limited domestic supply will continue to support prices in 2023,” he predicted.
Indian Confectionery Sweets, Mithai, at Chandu Sweets, Teenbatti, Walkeshwar.
Anshuman Poyrekar | Hindustan Times | Getty Images
Diwali, also known as the Festival of Lights, is one of the biggest religious celebrations in India and will be celebrated by Hindus, Jains and Sikhs all over the world in November. Central to the festivities is the Indian sweet Mithai, made primarily of milk, flour, ghee and sugar.
“That said, as prices remain high, consumers will be incentivized to substitute alternative products and limit their consumption, helping to keep a lid on more significant increases,” Biggin said.
Likewise, Sodhi expects prices to drop after Diwali, which falls in November this year. Milk prices may fall by 2 to 3 rupees per liter to around 50 rupees per litre, he said.
“After Diwali, prices will stabilize – may go down, but I don’t foresee a big drop.”
[pub1]