India is facing a rise in milk prices, and this is not expected to subside until November.
Matthew Lloyd | Bloomberg | Getty Images
India, the world dairy powerfaces a rise in milk prices, and this is not expected to subside until November.
“Over the past 15 months, there have been [an] extraordinary increase in milk and milk products, around 14-15%,” said RS Sodhi, former managing director of India’s leading dairy company, the Gujarat Cooperative Milk Marketing Foundation.
The price spike is due to rising feed costs, an increase in demand for ice cream and a contagious livestock disease, among other factors.
India, the world’s largest milk produceraccounts for 22% of world milk production, followed by the United States, China, Pakistan and Brazil.
According to data provided by the Mintec food price database, milk prices in India rose from Rs 46 to Rs 53 per liter (between $0.55 and $0.64) from November 2021 to early may.
It is an economic pressure for the Indians who are the biggest consumers of milk in the world.
“In India, every household buys milk every day. Per capita consumption is about 440 grams per person per day. Every Indian starts [the day] with milk,” Sodhi said.
“In the morning, people drink milk, from a bottle, or in tea and coffee…a lot of Indian desserts are mostly milk-based,” he added. Other local milk-based favorites include paneer, ghee and yogurt, all of which are staples in the usual Indian diet.
Higher feed costs
Higher feed prices coinciding with the peak demand season are fueling the spike in milk prices.
“Rising feed prices have discouraged farmers from providing enough feed for their livestock,” said Matthew Biggin, commodities analyst at Fitch Solutions’ BMI research unit.
India is facing a rise in milk prices, and this is not expected to subside until November.
Hindustan Times | Getty Images
Livestock feed generally consists of maize, wheat, rice and oats, among other cereals, according to India’s National Dairy Development Board. Many of these ingredients had significant spikes in the middle of last year and remain at high levels. Some price increases were driven in part by Russia’s invasion of Ukrainewhich disrupted supply chains and drove up prices.
In addition to rising feed costs, cattle farmers have also had to contend with higher transport, storage and energy prices, Biggin said.
Plagues and pandemics
Even before the increase in input costs, the dairy sector was already suffering from the effects of the pandemic.
“The sector was already under pressure, still feeling the effects of the pandemic where demand has been hit, putting smallholder farms, which make up a large part of India’s dairy sector, under financial pressure and leading to a reduction in the pace of production. ‘breeding’, he said.
An increase in demand for products such as ice cream as the country enters the summer months and then following religious festivals where milk-based sweets are a staple, [alongside] limited domestic supply will continue to support prices through 2023.
Matthew Bigin
Commodities Analyst at BMI
In addition, millions of the country’s dairy herds were tormented by lumpy skin diseasewhich caused blisters and reduced milk production in cattle.
“Lumpy skin disease is estimated to have killed or emaciated more than 300,000 cattle last year, negatively impacting milk production,” said Andrew Woods, deputy editor of Mintec.
Will prices go down after November?
India’s milk production “will likely remain under pressure” and increase the country’s reliance on imports, BMI’s Biggin said, especially as the sector enters the peak demand season.
“An increase in demand for products such as ice cream as the country enters the summer months and then subsequent religious holidays where milk-based sweets are a staple, [alongside] limited domestic supply will continue to support prices through 2023,” he predicted.
Indian confectionery sweets, Mithai, at Chandu Sweets, Teenbatti, Walkeshwar.
Anshuman Poyrekar | Hindustan Times | Getty Images
Diwali, also known as the Festival of Lights, is one of the biggest religious celebrations in India and will be celebrated by Hindus, Jains and Sikhs around the world in November. At the center of the festivities is the sweet Indian Mithai, made mostly from milk, flour, ghee and sugar.
“That said, while prices remain high, consumers will be incentivized to substitute for alternative products and limit their consumption, which will help limit more substantial increases,” Biggin said.
Similarly, Sodhi expects prices to fall after Diwali, which falls on November this year. Milk prices could drop from 2-3 rupees per liter to around 50 rupees per litre, he said.
“After Diwali, prices will stabilize – they might drop, but I don’t expect a major drop.”