Milk powder prices see some recovery but industry seeks import restriction

There are signs of recovery for the country's dairy farmers, struggling with both surplus stock and an inability to export due to low prices abroad of skimmed milk powder (SMP).

The industry says SMP prices have risen by Rs 10-12 a kg in the past fortnight, both at home and abroad. Things, however, are complicated by growing import of whey powder and lactose, due to lower international prices.

International prices of SMP are Rs 115-120 a kg; in India, around Rs 150 a kg. The domestic price is low by normal standards and dairies find it unviable to convert liquid milk into SMP for sale. For every 100 kg of cow milk, around 8.5 kg of SMP and 3.5 kg of ghee can be produced. SMP processing is relatively expensive as compared to processing of liquid milk and require prices at a certain level to be viable. 

“Prices have started showing some signs of recovery in both domestic and international markets and this is the first sign of revival. If the government now does some buffer stocking or announces an export subsidy to allow some consignment to go out of the country, the crisis is averted,” said R S Sodhi, managing director of the country's largest dairy entity, Gujarat Cooperative Milk Marketing Federation (GCMMF, producers of the Amul brand). 

Sources in the sector say the lean season for cow milk has started in Maharashtra, Tamil Nadu and Karnataka. While buffalo milk arrival would continue, slowing in cow milk production would ensure prices do not fall further.  

The current dairying problem is accentuated by growing import of whey powder and lactose; domestic prices are 25 per cent higher than abroad. Sodhi says India is at present importing around 40,000 tonnes of lactose and whey powder (then used for nutrition products). “If the imports are restricted, that would also offer temporary relief,” he said.

Devendra Shah, chairman of Pune-based Parag Milk Foods agrees. “If imports are restricted, farmers stand to benefit as dairies can pay Rs 3-4 a kg more as procurement prices.” He said he'd petitioned to the central government. 

GCMMF currently gets 26 million litres a day of milk, about a fifth higher than normal. It has SMP conversion capacity of 800 tonnes per day (tpd) and Sodhi sad these plants are in full capacity. The Federation is also working on setting up two more SMP plants, expected to begin operating in four months, easing the pressure. At present, GCMMF has hired five to six entities in Rajasthan, Madhya Pradesh and Maharashtra for converting milk into SMP. 

Sodhi says dairy farmers in Gujarat still get five per cent more in price as compared to the same period last year; however, it is down from two months before. Industry sources say milk prices in Gujarat were inflated owing to state assembly elections; there has since been a correction of 10-15 per cent. Overall, milk farmers across India are getting 20 per cent less compared to last year.