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Amul cuts skimmed milk prices by 6-7% on weak domestic demand

Subdued global prices make exports unviable, outlook remains weak

Dilip Kumar Jha  |  Mumbai 

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Faced with a sharp decline in demand during the ongoing lean season, coupled with a sharp increase in supply, skimmed producers (SMP) have cut their product prices by six-seven per cent across all varieties.

The leader, the Gujarat Co-operative Marketing Federation Ltd (GCMMF), which sells its products under the Amul brand, has revised its product prices by up to Rs 10 per kg. With this revision, prices currently stand around Rs 220 per kg.

The price cut indicates a sharp decline in demand from consumers. Normally, demand for products remains robust during the festive season. However, the demand has remained lacklustre so far this season.

"We have cut maximum retail price (MRP) of skimmed powder by six-seven per cent across all varieties recently because of weak demand from consumers. prices are likely to remain subdued in coming months due to the commencement of new supply season," said R S Sodhi, managing director, GCMMF.

Normally, the new season of supply begins in September and gradually intensifies to reach its peak in October and November. During this period, normally, dairy process their liquid to manufacture for supply in the lean supply season of April and May.

The price decline, however, is unlikely to impact farmers’ realisations for the supply of liquid as dairy are preparing to absorb a squeeze in margins from lower prices.

"Dairy in Maharashtra have posted lower profit margins for June quarter due to increase in procurement prices. prices, however, are unlikely to decline because of a cut in prices," said Shirish Upadhyay, senior vice-president (strategic planning), Parag Foods Ltd, the producer of Gowardhan brand and cheese.

An Edelweiss Securities report said that the average procurement price for Prabhat Dairy stood at Rs 27.1 for the April–June quarter of 2017, up by five per cent from the corresponding quarter last year and down by around five per cent from the previous sequential quarter.

Dairy producers, however, find exports difficult given that the prevailing prices in international markets are 20 per cent lower than domestic prices.

First Published: Tue, August 22 2017. 15:05 IST