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The price of milk is likely to remain stable despite the expected dip in supply and high demand during summer, thanks to the bountiful inventory of skimmed milk powder.
The last increase in milk prices was nearly nine months ago. Low export of skimmed milk powder (SMP) this financial year will keep the milk prices in check.
Kuldeep Saluja, managing director, Sterling Agro, said, “India produces around 100,000 tonnes of SMP every year. This financial year exports have not been more than 30,000 tonnes. There is enough inventory in the country. It would be liquidated when the production drops in summer.”
Sterling Agro itself is a major exporter of SMP.
Saluja said even as prices of SMP begin to firm up in the last few auctions in New Zealand, fresh supplies are expected to come from Europe starting this month-end. “As the European Union abolishes the milk quota (or dairy produce quota) from the end of this month, the global dairy market would be flush with fresh supplies. Even the US is focusing on exports, increasing supply.”
R S Sodhi, managing director, Gujarat Cooperative Milk Marketing Federation (GCMMF) said: “In the last three auctions in New Zealand, the prices of whole-milk powder went up 45 per cent, while SMP prices have gone up around 18 per cent.”
GMMF, which sells milk and milk products under the Amul brand, is India’s largest dairy cooperative.
Sodhi said domestic SMP prices are around Rs 200 a kg now. They are expected to go up to Rs 275 a kg in the coming months.
The international prices of SMP are lower — at present, it is Rs 180-190 a kg. As a result, exports are likely to remain low.
R G Chandramogan, managing director, Hatsun Agro, however, said that if international prices of SMP firmed up, the prospects for exports might improve.
“Coupled with the drop in production during summer, there could be some change in the pricing dynamics. However, it is still uncertain,” he said.
An industry insider, who did not want to be named, said prices were likely to remain stable during the May–June period. Supply would not be affected as co-operatives cannot stop procurement from farmers.
“They (cooperatives) are already sitting on a huge inventory of SMP,” said a Delhi-based private dairy player.
Prices of liquid milk is Rs 33-48 a litre, varying across regions. Several cooperatives had seen better supplies during summer last year.
For example, Rajasthan Cooperative Dairy Federation had seen a 10 per cent increase in procurement during summer in 2014 on a year-on-year basis.
On the whole, the sector feels that at least for the coming quarter, there is hardly any chance of price rise in liquid milk. While dairies might take a re-look at the situation around mid-summer, a price rise is unlikely until the second half of the year, when international prices might recover.
Shiva Mudgil, senior dairy analyst and assistant vice president, food & agribusiness research and advisory, Rabobank explained the global situation, "Global milk powder prices seemed to hit bottom last year with strong supplies from the key exporting regions. There has been a slight recovery due to current dry conditions in New Zealand and with EU containing milk production till March 2015 to avoid penalties.However EU’s milk production quota is going off from April 1 this year. There is continuing ban on EU dairy products in Russia. Also US players have been increasing their focus on exports lately."
He added, "We don't see China coming back to the global market in a big way until the second half (of 2015). Global milk prices are likely to recover around that time only. Indian exporters; who have suffered significantly in the current situation; may look forward to second half of this year with some optimism."
GOING STEADY
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The last increase in milk prices was nearly nine months ago
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Prices are likely to remain stable during the May–June period
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Supply unlikely to be affected as cooperatives cannot stop procurement from farmers
- Prices of liquid milk is around Rs 33-48 a litre, varying across regions
