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Dairy Product Prices Expected to Stay Firm Due to Increased Demand

A surge in demand for dairy products in the last year, along with nearly unchanged milk output, has resulted in restricted supply and elevated costs. Rates may remain firm this summer, according to industry experts.

Shivam Dwivedi
Dairy Product Prices Expected to Stay Firm Due to Increased Demand
Dairy Product Prices Expected to Stay Firm Due to Increased Demand

The Centre, in collaboration with the National Dairy Development Board (NDDB), is monitoring the supply-demand gap in dairy products and will make an import decision based on the situation. In 2021-22, India's milk output was 221 million tonne, up 6.25 percent from 208 million tonne the previous year. However, production in 2022-23 is expected to remain stable or expand somewhat.

'Milk prices are also projected to stay firm going into the summer season due to tight demand-supply balance and feed cost pressures,' said RBI Governor Shaktikanta Das on April 6 when announcing the monetary policy. The RBI governor also stated that consumer price inflation has risen since December 2022, owing to price increases in grains, milk, and fruits.

"The dairy sector is going through an unprecedented time," Mother Dairy Managing Director Manish Bandlish remarked when reached. There is a constant increase in demand for milk and milk products, but raw milk procurement prices are also rising dramatically. Furthermore, he stated that the irregular weather circumstances are affecting the supply of feed and fodder, driving increasing input costs and, as a result, raw milk prices. "Furthermore, the overall flush season was not as anticipated, so the commodity inventory level in the country is low," Bandlish added.

In the future, he believes that the course of the monsoon, as well as the availability of feed and fodder, will determine price movements. According to Bandlish, the corporation is closely monitoring the situation and will ensure that the markets are appropriately fed. R S Sodhi, President of the Indian Dairy Association (IDA), stated that the government is looking into the situation. "We are hopeful that if the government decides to allow imports, it will have no effect on the prices farmers receive for the milk they supply," he said.

Since September 2022, major milk cooperatives including Amul and Mother Dairy have risen retail prices by 2-3 per litre in two and three spells, respectively, followed by other state cooperatives, owing to an increase in feedstock costs. According to the Ministry of Fisheries, Animal Husbandry, and Dairying, "there has been some demand and supply gap observed in the dairy sector- primarily due to increased demand for nutritious, safe, and hygienic milk and milk products post COVID-19 pandemic." It further stated that several dairy cooperatives had requested the import of stored dairy goods such as milk fat and powder.

Their import demand is driven by rising dairy consumption as well as the possibility of a shortage of milk over the upcoming summer (a lean season). "Against this backdrop, the NDDB, in collaboration with the Government of India, has been monitoring the demand-supply situation. Because the import procedure takes time, the ministry added, "the necessary back-end processes are being put in place to timely manage the situation in case of any eventuality."

If the circumstances permits, the government stated that the import could be done to help dairy cooperatives meet summer needs. However, it will be ensured that it is solely handled through NDDB, and needy Unions may be granted the stocks at market value following a thorough examination. Earlier this week, Rajesh Kumar Singh, Secretary of Animal Husbandry and Dairy, stated, "The impact of lumpy skin disease on cattle can be felt to the extent that total milk production is a little stagnant."

Milk output has typically increased at a rate of 6% each year. However, it will either be static or expand by 1-2 percent this year (2022-23)." Because the government only considers milk production data from cooperatives rather than the broader private and unorganized sectors, "we assume it will be stagnant," Singh added.

Domestic demand increased by 8-10% during the same period, owing to a resurgence in post-pandemic demand. "There is no such thing as a milk supply limitation in the country...There is a sufficient supply of skimmed milk powder. (SMP). However, supplies of dairy products, particularly fats, butter, and ghee, are smaller than the previous year, according to the secretary.

After reviewing the stock condition of milk in southern states, where the flushing (peak production) season has begun, the government will intervene to import dairy products such as butter and ghee, he said. The shortfall would be less severe in North India, where the lean season has been postponed due to untimely rainfall in the last 20 days. The last time India imported dairy products was in 2011.

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