Financial Daily from THE HINDU group of publications
Tuesday, Jan 27, 2004
Financial Daily from THE HINDU group of publications Tuesday, Jan 27, 2004 |
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Dairy & Dairy Products Agri-Biz & Commodities - Dairy & Dairy Products Skimmed milk powder prices rule high — Dairies cashing in on global trend Harish Damodaran
New Delhi , Jan. 26 DOMESTIC dairies have not had it so good for a long time. The winter months are usually the `flush' season for milk, when animals go into full lactation, resulting in increased production and dipping prices. But this time round, things are different. Skimmed milk powder (SMP) prices are currently ruling at around Rs 95 per kg, compared with Rs 70 a year ago and Rs 56 the year before at this time. The situation is more or less the same in respect of ghee. The bulk (15-kg) tins of most brands are quoting now at Rs 2,040-2,050 or Rs 136-137 per kg, whereas they would typically rule at Rs 110-115 per kg at this point. Even if realisations for dairies at these market prices may be lower, at Rs 90 per kg for SMP and Rs 125 per kg for ghee, the combined income from processing 100 kg of buffalo milk containing 6 per cent fat and 9 per cent SNF (solids-non-fat) would come to around Rs 1,560. Against this, they are procuring milk at the rate of Rs 180-190 per kg fat, which is Rs 1,080-Rs 1,140 per 100 kg of milk. Even if the price at the dock goes up to around Rs 1,175 and costs of drying, consumption of utilities, packaging, etc., are factored in, the dairies would be netting Rs 2.50-Rs 3 for every kg of milk they process. According to Mr B.M. Vyas, Managing Director, Gujarat Cooperative Milk Marketing Federation, the high domestic prices have lot to do with international trends. SMP of Australia/New Zealand origin is now quoting at $1,900 (Rs 85,500) per tonne free-on-board, against $1,700 per tonne a year ago and the $1,150-1,200 per tonne levels of mid-2002. "Supply is equally tight in North America, where the incidence of mad cow disease has also contributed to higher prices," he pointed out. Only in Europe have prices fallen by about $100 to below $1,800 per tonne over the last week. This, in turn, has been due to the European Commission's recent decision to increase export subsidy (`refund') for SMP by 75 euros to 645 euros (Rs 37,035) per tonne. "At these prices, imports are simply not feasible and it is this knowledge that is keeping prices firm here as well," Mr Vyas added. Other industry observers also attribute the higher prices to the impact of last year's drought, which has caused delayed calving by the animals. But this, they emphasise, is not the main factor because in most States, milk supplies have been restored to normal levels. "There is no real milk shortage. Some dairies are experiencing procurement shortfall, but this is mainly because they are not offering good prices to farmers. And they are not able to do so because of State Governments not raising retail liquid milk prices," they said. But even this is likely to change. While retail prices have already been hiked by Re 1 per litre in Karnataka and Maharashtra, they are set to similarly go up even in Gujarat and Delhi, where Mother Dairy is expected to announce an increase with effect from February 1.
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