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Increasing milk exports can cause volatility in domestic prices: Dairy board chief

NDDB chief feels that competition between domestic and export markets can lead to increase in prices for domestic consumers

BS Reporter  |  Ahmedabad 

While increasing exports can give higher returns in some years, fluctuations in global supply and demand could lead to substantial volatility in back home, felt Amrita Patel, chairperson of the (NDDB).

As our dairy sector integrates itself increasingly with the global one, the volatility in international markets is likely to be transmitted to a large extent to our domestic market, the chairperson said.

She added, “I fear that all too often when we think of our position in the global market and the steady growth in our milk production, we see ourselves as growing exporters of dairy commodities, and believe this could also improve returns to our milk producers. While this may be so, we need to appreciate that pursuing this path without ensuring that the domestic market is met would result in competition between the domestic and markets and an increase in prices for domestic consumers.”

She claimed the rise in feed costs from an increase of nine per cent in 2011-12 to 27 per cent in 2012-13 is also leading to higher production costs and therefore higher milk prices. At some stage, the rise in price of milk could erode the ability of many families to purchase milk.

About seven per cent of total world milk production is traded. Developed countries account for about three-fourths of exports and developing countries account for about three-fourths of the imports.

Currently, the organised sector handles only about 30 per cent of the marketable surplus. Patel feels in the interest of both producers and consumers, it is necessary to increase the share of the organised sector comprising cooperatives, producer companies and private companies. The National Dairy Plan has set this target over the next 15 years at 65 per cent. 
 
"But to achieve this, private companies would need to collect milk directly from producers as is being done by cooperatives and producer companies. Alternatively as is the case abroad, private companies need to explore sourcing their requirement of milk from cooperatives and producer companies.Further, since the sale of liquid milk is likely to contribute to much of the trade in milk in India for quite some years, private companies need to enter the liquid milk market in addition to marketing products," Patel said. 
 
She mentioned that in future it would be desirable that the private sector and cooperatives work together to ensure that exports take place after meeting the domestic demand of both. If a higher price needs to be paid to match export prices, then this should be paid, said Patel. 
 
 
Meanwhile, she also said that the growth in milk production in our country, as reflected in the rate of inflation, appears to be satisfactory when compared to other protein foods like eggs, meat and fish. The per capita availability of milk of 290 gm per day is slightly more than world average.
 
According to Patel, over the last five years, India’s milk production has increased by about 25 million tonnes compared to an increase of about 6.6 million tonnes in the US, 5.4 million tonnes in China, 2.7 million tonnes in New Zealand and 1.6 million tonnes in the EU.
 

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Increasing milk exports can cause volatility in domestic prices: Dairy board chief

NDDB chief feels that competition between domestic and export markets can lead to increase in prices for domestic consumers

NDDB chief feels that competition between domestic and export markets can lead to increase in prices for domestic consumers
While increasing exports can give higher returns in some years, fluctuations in global supply and demand could lead to substantial volatility in back home, felt Amrita Patel, chairperson of the (NDDB).

As our dairy sector integrates itself increasingly with the global one, the volatility in international markets is likely to be transmitted to a large extent to our domestic market, the chairperson said.

She added, “I fear that all too often when we think of our position in the global market and the steady growth in our milk production, we see ourselves as growing exporters of dairy commodities, and believe this could also improve returns to our milk producers. While this may be so, we need to appreciate that pursuing this path without ensuring that the domestic market is met would result in competition between the domestic and markets and an increase in prices for domestic consumers.”

She claimed the rise in feed costs from an increase of nine per cent in 2011-12 to 27 per cent in 2012-13 is also leading to higher production costs and therefore higher milk prices. At some stage, the rise in price of milk could erode the ability of many families to purchase milk.

About seven per cent of total world milk production is traded. Developed countries account for about three-fourths of exports and developing countries account for about three-fourths of the imports.

Currently, the organised sector handles only about 30 per cent of the marketable surplus. Patel feels in the interest of both producers and consumers, it is necessary to increase the share of the organised sector comprising cooperatives, producer companies and private companies. The National Dairy Plan has set this target over the next 15 years at 65 per cent. 
 
"But to achieve this, private companies would need to collect milk directly from producers as is being done by cooperatives and producer companies. Alternatively as is the case abroad, private companies need to explore sourcing their requirement of milk from cooperatives and producer companies.Further, since the sale of liquid milk is likely to contribute to much of the trade in milk in India for quite some years, private companies need to enter the liquid milk market in addition to marketing products," Patel said. 
 
She mentioned that in future it would be desirable that the private sector and cooperatives work together to ensure that exports take place after meeting the domestic demand of both. If a higher price needs to be paid to match export prices, then this should be paid, said Patel. 
 
 
Meanwhile, she also said that the growth in milk production in our country, as reflected in the rate of inflation, appears to be satisfactory when compared to other protein foods like eggs, meat and fish. The per capita availability of milk of 290 gm per day is slightly more than world average.
 
According to Patel, over the last five years, India’s milk production has increased by about 25 million tonnes compared to an increase of about 6.6 million tonnes in the US, 5.4 million tonnes in China, 2.7 million tonnes in New Zealand and 1.6 million tonnes in the EU.
 
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