Delayed flush: Milk prices up as output drops

TV Jayan/Rutam Vora New Delhi/Ahmedabad | Updated on December 15, 2019

Amul said that apart from the Gujarat market, it has hiked prices of milk in Delhi (NCR), West Bengal, Mumbai and Maharashtra (file photo)   -  PTI

Rains to blame for poor production; Amul, Mother Dairy hike prices by ₹2-3/litre

Despite the onset of milk flush season with the start of winter, the dairy sector is feeling a chill due to an unusual 7-10 per cent decline in milk procurement as compared with what was seen during the same period last year.

Also, a delay in the flush due to an extended monsoon has added to reduced milk production even at the beginning of winter. Flush season is when milk yield peaks in cold climate.

India’s largest dairy brand, Amul, has hiked prices of liquid milk in pouches by ₹2 per litre across key markets. This comes barely six months after a similar hike in May. In New Delhi, Mother Diary has also increased milk prices by ₹2-3 a litre. Mother Dairy too increased packet milk prices in May, but spared bulk-vended milk. However, this time, token/bulk-vended milk prices have also been increased by ₹2 to ₹42 a litre. This is the second time that prices have been increased this year.

The question is why has there not been a good flush season till now. The reason, as explained by a spokesperson from Mother Dairy Fruit & Vegetable Pvt Ltd is the erratic rains in the initial stages of monsoon this year. “..a number of States reported low rainfall leading to a drought-like situation. In the later part, the monsoon got extended beyond the normal period in major milk producing States such as Gujarat, Rajasthan, Maharashtra and Karnataka. Fodder crops were destroyed due to rains in Karnataka, Maharashtra, Bihar and Gujarat. Also, the cost of feed ingredients such as de-oiled rice bran and rice bran have gone up resulting in feed costs going up by 25-30 per cent.”

Feed and fodder costs constitute almost 70 per cent of total cost of milk production. “Loss of cattle, delayed calving and high input costs have also impacted milk availability. The scarcity has been reported from all parts of the country. It is estimated that currently the country is reeling under a deficit of 10-15 per cent as compared with last year,” the spokesperson told BusinessLine adding that “Owing to low stocks of dairy commodity (SMP and Butter) with major dairy cooperatives and private players, their prices have also been going up, incentivising the dairy plants to purchase milk at a higher price to build up stocks for the coming summer season.”

Derivative products

The prices of other dairy derivative products such as curd, and cottage cheese is also set to increase correspondingly.

An Amul spokesperson stated that there has been a 35 per cent hike in cattle-feed prices this year, which led to dairy federations across the State hiking procurement prices to ₹100-110 per kg fat or 15 per cent as compared with last year. “It may be noted that in the last three years, consumer milk prices have been hiked only twice totalling ₹4 per litre. This works out to barely 3 per cent annually, which is even lower than the rate of inflation. Since it is necessary that milk producers continue to get remunerative prices, this price hike had to be implemented,” the Gujarat Cooperative Milk Marketing Federation (GCMMF) spokesperson said in a statement here.

Amul stated that apart from Gujarat market, it has hiked prices for various milk categories in markets such as Delhi (NCR), West Bengal, Mumbai and Maharashtra.

Major beneficiary of the milk price hike would be farmer organisations like Mother Dairy, who pass on close to 80 per cent of the sales realisation from milk to procurement of milk. As a result, dairy federations such as Mother Dairy and Amul set the price trend in the market.

Taking a cue from the price hike by market leaders, the smaller cooperatives and private dairies in other parts of the country are likely to follow suit. There is news that cooperative milk dairies in other States in north India too have increased milk prices. For instance, Saras Dairy in Rajasthan announced up to ₹4 increase per litre of milk in early December.

Published on December 15, 2019

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