The Hindu Business Line : Hatsun, Schreiber Dynamix plan milk holidays on low exports

New Delhi, Nov. 16 With export orders drying up and global prices crashing, leading private dairies are planning to sharply cut back their milk procurement operations. The move may impact thousands of farmers, who rely on daily milk sales for meeting their liquid cash requirements.

Among the big players contemplating ‘milk holidays’ or refusing to buy beyond a certain quantity include the Chennai-based Hatsun Agro Product Ltd and Schreiber Dynamix Dairies Ltd at Baramati (Maharashtra), which happens to be the Union Agriculture Minister, Mr Sharad Pawar’s pocket borough.

“Our dairy currently has a milk procurement capacity of 11 lakh litres a day (LLPD). From November 25, we will limit procurement to four LLPD” said Mr Rajesh Lele, Vice-President (Milk Procurement) at Schreiber Dynamix.

The Rs 863-crore Hatsun Agro is likewise considering reducing milk purchases from its existing 16 LLPD to 10 LLPD, effective from December 1.

CRASHING SMP PRICES

Hatsun’s CMD, Mr R.G. Chandramogan, said the company was being “forced into the situation” in view of the current international environment, where prices of skimmed milk powder (SMP) have fallen to $1,800-1,900 a tonne, from $3,200 levels till six months back.

Global SMP rates had even crossed $5,000 a tonne, but that was during the period from February to September 2007, when the Government banned exports.

Out of the 16 LLPD that Hatsun now procures, it sells 10 LLPD as liquid milk in pouches (‘Arokya’ and ‘Komatha’ brands) or as ice-cream (‘Arun’).

“My problem is with the remaining six LLP that I process into SMP and other products mainly for exports. And this market has become totally unviable,” Mr Chandramogan told Business Line.

For Schreiber Dynamix – a subsidiary of the $3 billion US-headquartered Schreiber Foods – the problem is more serious because it does not market any liquid milk.

Of the 11 LLPD that it buys, about seven LLPD is converted into SMP and casein, which are both exported.

CASEIN FALLS

Casein prices have plummeted to $5,400 a tonne, having touched $10,500 in April-May. “We can now only procure the balance four LLPD that goes for making cheese, UHT milk and dairy whiteners,” Mr Lele added.

During 2007-08, the country exported 38,515 tonnes of milk powder worth Rs 541.91 crore and 14,700 tonnes of casein valued at Rs 504.28 crore.

The timing of the crash in global prices couldn’t have been worse, coinciding with the ‘flush’ season when animals (particularly buffaloes) produce almost twice the quantity of milk that they do in the ‘lean’ summer months.

“Only those that are into domestic marketing of liquid milk, butter, ghee, ice-cream and other products will run their dairies at full capacity this time. The ultimate sufferer would be the farmer, who will find no takers for his surplus milk,” an industry source pointed out.

FOLLOWING SUIT…

Apart from Hatsun and Schreiber Dynamix, Parag Milk & Milk Products (‘Gowardhan’ brand) at Manchar (Pune) is also proposing to scale down procurement, while prominent northern dairies, including VRS Foods Ltd (‘Paras’), Modern Dairies Ltd and Bhole Baba Dairy Industries (‘Krishna’) have reportedly shut down their casein plants for want of orders.