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The dairy sector expects a surge in its export to Southeast Asia, where local entities seem unable to satisfy a growing demand for milk. Insiders say skimmed milk powder (SMP) export to the region could rise to 10,000 tonnes from the present 5,000 tonnes.
"Across Asia, India is the only country with surplus milk. Above all, we have the location advantage to cater to the Southeast Asian market. Also, price competitiveness is there," said R S Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation (GCMMF), which sells products under the Amul brand.
Milk consumption in the area is mainly driven by high birth rates, rising incomes, improving diets, growth in modern retailing, urbanisation and countrywide school milk programmes. Competition is rising among international dairy companies, with six countries in the Association of South East Asian Nations bloc - Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam - increasingly depending on imports. A Rabobank report said dairy trade flows into the region surpassed 1.6 million tonnes in 2012, equating to a $5.5 billion export opportunity. The region is one of the few remaining dairy battlegrounds and the boom in demand has triggered intense competition among producers.
"We expect dairy consumption across the Asean-6 to grow 2.4 per cent per year through to 2020. This creates a requirement for an extra three billion litres of milk, which local players are ill-equipped to deliver," said Rabobank analyst Michael Harvey.
"We see 7,000-8,000 tonnes of SMP exports every month. Farmers benefit from this, as we get a good price from the international market," said Sodhi. Amul alone exported around Rs 100 crore worth of SMP in April-June. It eyes Rs 300 crore of export this financial year.
According to sector insiders, Indian SMP costs around $3,450 a tonne. Competing nations such as Australia and New Zealand charge $3,550-3,650 a tonne. A stronger dollar against the rupee further benefits exporters. "Prices are getting lucrative. When the dollar was Rs 56, the price was worked out at Rs 193; now it is over Rs 207 a kg," said Viney Mahajan, associated with a private dairy in North India.
Rabobank analysts say outcompeting rival companies will not be enough to secure victory in this market. Exporters must also conquer a number of structural challenges, such as food price inflation, protectionist policies and supply chain inefficiencies.
"Southeast Asia is a major market. Milk powder export is a commodity business; hence, our advantage is our quality and price. However, despite having surplus milk production, we are still a marginal exporter. We export hardly one per cent of our total production," said R G Chandramogan, chairman, Hatsun Agro Products. The company exports SMP to some countries in the region, he said. India's total milk powder exports are likely to touch 100,000 tonnes this year.
