Skimmed milk export prices dip

With international rates falling 30%, producers bank on local markets.

Skimmed milk powder (SMP) export has turned unattractive for domestic producers following a sharp decline in the export price realisation of the commodity.

During this time last year, SMP export was in full swing and the government had to impose an export ban to check the rising domestic price.

SMP prices have fallen by about 30 per cent internationally since October when India lifted a ban on export of the commodity. The decline has made exports unattractive for Indian producers, who receive significantly better prices in the domestic market.

Around last February, when the government banned SMP exports, these producers were realising Rs 5 per kg extra on exports. But the situation is different now.

"The international market has weakened in the last one year owing to high production in countries such as the US and Ukraine. This, along with the rupee appreciation has hit our export realisation and affected exports. A year ago, we were realising Rs 5 a kg higher on exports. However, now the domestic realisation at Rs 125 a kg is Rs 7 a kg higher compared with exports," said Kuldeep Saluja, the managing director of Delhi-based Sterling Agro Industries, the country's largest SMP exporting company.

International SMP prices, that were ruling around $4,100 a tonne 5-6 months back, have now crashed to $3,000 a tonne.

However, domestic SMP prices have stabilised in the range of Rs 125-130 a kg. Prices were ruling at Rs 125 a kg when the government banned exports last February.

"SMP prices had escalated in the international market following the export ban in India. With the opening up of our exports, the prices have corrected. There are no queries from international buyers since the commodity is showing a declining trend", said Sandeep Agarwal, director, SMC Foods.

The ban was imposed in February last year to prevent a shortage of milk in summer, a traditionally lean season in milk production.

The ban lapsed with effect from October 1 and, according to industry estimates, roughly 25,000-30,000 tonnes of milk powder has been shipped since then.