Milk prices stable for now

With procurement prices recently raised and powder export set to taper, supply anxieties are unlikely till at least June

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Most dairying entities in the country’s organised sector say there is no plan to raise the price of milk before June, when the situation is likely to be reviewed. Having raised procurement prices recently, they expect a better supply till at least then.

Summer is when milk production usually drops, owing to shortage of fodder and the fact of the calving season among bovine animals. Historically, production is usually down by 30-40 per cent during these months.

Some loose milk sellers in Maharashtra’s unorganised sector, especially the Mumbai region, have already raised prices by Rs 3 a litre, owing to a dip in supply. A handful of Delhi-based small dairies also feel that once the supply starts dipping, there might be a slight rise in prices in liquid milk, especially in the unorganised market.

Industry insiders say organised entities would have a more structured procurement process but it would be a interesting to see how long they can hold on to prices. The average price of liquid milk is Rs 42-46 a litre across the country.

The price of skimmed milk powder (SMP) is likely to soften in the coming fortnight or so. Thanks to heavy export, these prices have almost doubled over a year, to Rs 280-290 a kg. However, says R G Chandramogan, chairman and managing director of Hatsun Agro, a leading Chennai-based company,” India already exported about 120,000 tonnes of SMP last fiscal (2013-14). However, prices in the international market (New Zealand auctions) have fallen by around nine per cent in the past few days. Hence, as dairy companies are unable to fetch good prices in the international market, the stocks planned for export would be diverted back to the domestic market, bringing down prices.”

R S Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation (GCMMF), which markets milk and dairy products under the Amul brand, made the same point. Amul was a leading exporter of SMP in 2013-14, of 12,000 to 13,000 tonnes.

If need be, SMP can be converted back to liquid milk, to meet the increased requirements during summer. Sodhi says production is likely to be down by 30 per cent in the coming months. Hatsun’s Chandramogan says in the cow belt of southern India, production would be down 15-20 per cent; for buffaloes, it could be down further, by 40-45 per cent.

As mentioned earlier, dairies had already raised their procurement prices. For instance, the Surat District Milk Union Producers’ Ltd (SDMUPL), also known as Sumul Dairy and a GCMMF member, recently raised the milk procurement price for farmers by Rs 20 per kg fat to Rs 555 for buffalo milk and Rs 525 for cow milk. “The supply during summer dips by 10-20 per cent. However, there will be no immediate hike in retail prices of milk,” said Jayesh Desai, managing director.

Sources in Milkfed, the Punjab-based cooperative dairy network, selling products under the Verka, brand said they’d raised procurement prices by Rs 20 per kg fat to Rs 520 last month. It commensurately raised the retail price of liquid milk by Rs 2 a litre, selling now in the range of Rs 36-44 a litre.

Desai, however, said: “The industry may review the situation after June and take a call on price revision.”

“All major dairies have recently raised prices, and procurement prices are high, too. If the flow continues, there might not be any immediate price hikes. However, around May-June, when the demand for products like lassi, dahi, ice cream, etc, rise, there might be a shortage of milk,” said V K Agnihotri, general manager, marketing, at Maharashtra-based Mahanand Dairy.