Milk prices crash as private dairies cut purchases in North

Private dairies, mainly in Maharashtra and northern States, have cut their milk purchases from farmers this year, citing weak global prices for the skimmed milk powder (SMP). As a result, the procurement prices of milk in these States have dropped 20-25 per cent over last year.

“It’s a difficult situation. SMP exports are not happening due to the lack of parity in prices. The domestic demand has been slow due to delay in the start of the marriage season. We expect the domestic demand to pick up from early December,” says Sandeep Aggarwal, Director of SMC Foods Ltd, a Delhi-based exporter.

The procurement price for the buffalo milk has dropped to ₹31-32 a litre against last year’s ₹38-40, says Aggarwal. The cow milk is lower by ₹8 at ₹23-24 a litre. SMP prices in India are hovering between ₹180 and ₹200 a kg, a bit higher than the global prices. RS Khanna, a dairy sector expert and Director of Kwality Dairy India Ltd, says prices have crashed as there are no takers for milk procured by the middlemen or agents this year. Kwality has been procuring about 3.5 lakh litres a day directly from farmers, while it has cut purchases from the agents, he adds. Kwality, which sells liquid milk under the Dairy Best brand in the National Capital Region, has been paying ₹31-32 a litre to the farmers, while the landed price of milk collected by the agents is available at ₹29 a litre, Khanna says.

Pressure on cooperatives The lower procurement by private players in these States has put pressure on the cooperatives as more farmers are seen pouring milk to the dairy unions with the commencement of the ‘flush’ or the peak producing season with the onset of winter. The Gujarat Cooperative Milk Marketing Federation (GCMMF), which owns the Amul brand, has seen an 18 per cent increase in daily milk procurement over the past few weeks, said Managing Director RS Sodhi. “We are now procuring 165 lakh litres a day, of which 30 lakh litres are coming from States other than Gujarat such as Rajasthan, Uttar Pradesh and Haryana.” GCMMF has witnessed a 14 per cent growth in milk procurement in Gujarat at 135 lakh litres a day, while the growth in milk purchases in other States has been much higher. Sodhi said the higher milk procured is being converted into SMP as the country’s largest dairy cooperative had exhausted all its stocks with robust overseas demand last year. India turned a net exporter of dairy products in 2013-14 with SMP shipments of over 1.22 lakh tonnes. The total value of dairy products shipments were estimated at over ₹3,318 crore. Similarly, in Maharashtra, the cooperatives with processing capacities have stepped up their purchases as farmers are forced to sell to middlemen at lower prices. “We are procuring about 60,000 litres more daily now and it could go up further during the peak flush season of December-January,” said DV Ghanekar, Managing Director of the Kolhapur Zilla Sahakari Dudh Utpadak Sangh Ltd, which sells its products under the Gokul brand.

Gokul, which is currently procuring about 9 lakh litres a day, expects its daily milk purchases from farmer to exceed a million litres by December-January.

The drop in milk prices is unlikely to benefit the consumers as the dairy cooperatives, which account for bulk of the liquid milk sales, do not have any plans to cut their prices as their payouts to farmers has not been reduced. However, the pace of inflation in milk witnessed in recent years could slow down.

Prices stable in South Down South, the procurement prices have been largely stable with cooperatives such as the Karnataka Milk Federation having a monopoly in procurement in the State, while in Andhra Pradesh, both the cooperatives and the private players having a fair share of the produce.

In Tamil Nadu, the repeated rains in recent months have not allowed to see a good ‘flush’ this year, said RG Chandramogan, Chairman and Managing Director of Hatsun Agro Product Ltd. India’s milk production grew 6 per cent to 140 million tonnes in 2013-14, aided by a normal monsoon.