By Zia Haq
In the past four years, milk output has grown by over 6% every year. That fact, coupled with a slump in global prices of skimmed milk powder is adding to the agrarian challenge India faces.
Livestock farmers dumping gallons of fresh milk on the streets to protest falling milk prices have become all too familiar a scene — a sign that even the lucrative dairy sector is battling a crisis confronted by the rest of agriculture.
Plunging raw milk prices have angered farmers already hit by lower crop prices. Milk faces the same crisis as several other commodities — a domestic glut and declining exports that have contributed to agricultural distress, on top of the vagaries of weather.
Milk procurement prices, or the price at which mid-level aggregators in the supply chain buy from farmers before selling to dairies, have fallen 20-25% over the past 12 months, according to S Daljit Singh of the all-India Progressive Dairy Farmers Association (PDFA).
Part of the problem is an unprecedented spurt in milk output in India, the world’s largest producer. In the past four years, output has grown by over 6% every year. Production was 165.4 million tonnes in 2016-17. In 2017-18, it was estimated to be 176.35 million tonne, a 6.5% annual jump.
The crisis lies squarely in the skimmed milk-powder segment rather than the liquid milk sector. The powdered variety is India’s main export item, while most of the liquid milk is domestically consumed.
A slump in global prices of skimmed milk powder have hit India’s exports, resulting in a surplus domestic stockpile of 2,00,000 tonnes of milk powder, according to RG Chandramogan, chairman and managing director of Hatsun Agro Product Ltd.
The average price of skimmed milk powder in the international market in 2017-18 was Rs 120 per kg, according to the website of CLAL, a dairy consulting firm, while the cost of production in India is at least Rs 200 per kg.
The effects of this surplus stockpile have spilled over to the liquid milk segment. India consumes nearly all of its liquid milk supply, the quantity that remains after processing various dairy items, such as ghee (clarified butter), curds, skimmed milk powder and so on. “An excess of powder milk due to less export will therefore mean an excess of liquid milk too,” said Animesh Kalra, trade analyst at Mumbai-based Comtrade Limited.
In mid-July, farmers in Maharashtra started the latest round of milk protests called by the Swabhimani Shetkari Sanghatana headed by Raju Shetti, a member of Parliament. “Farmers are getting as low as Rs 16 for a litre of cow milk. They need at least Rs 25-27 to be profitable,” Shetti said, adding that if the government could offer a production subsidy for sugar, it should also at least give a milk subsidy of Rs 5 a litre.
Daljit Singh of PDFA, which represents milk farmers in Punjab, too demanded a direct subsidy of at least Rs 7 per litre.
According to India Ratings and Research Private Limited, a credit rating company, milk output is likely to touch a record 186 million tonnes in 2018-19. Given the limited growth in domestic demand and because milk is highly perishable, the surplus is usually converted into powder. “However, price growth in the international market has been languishing since June 2017,” the brokerage said in a recent note. This has led to milk powder stocks “piling up and the resultant stress being reflected in the procurement prices in some states,” it said.
The agriculture ministry has officially requested the commerce ministry to increase the export incentive for milk and milk products as well as casein, the main protein contained in milk and cheese, from 10% to 20%.
To placate farmers, the state governments of Gujarat and Maharashtra, the two leading milk producing states, have offered Rs 50,000 a tonne subsidy for export of milk powder.
To boost domestic prices, the import duty on whey milk powder was increased from 30% to 40% on March 27, 2018. To increase demand, the agriculture ministry is pushing states to take up milk distribution through the 1.36 million Anganwadi centres (women and child development centres) and offer milk as part of the mid-day meal scheme at government schools.
“The government clearly preferred trade incentives over direct subsidy to farmers at this stage, hoping that international will recover soon,” Kalra of Comtrade said.
Source: Hindustan Times