A tightness in milk supply, being witnessed in the South, may start easing by the middle of April with the likely early onset of the flush or the peak production season. A weaker flush last year coupled with exports of butter amidst a post-Covid rebound in consumer demand for dairy products resulted in tight milk supply in the South in the recent weeks.
RG Chandramogan, Chairman, Hatsun Agro Products Ltd, the country’s largest private dairy player, said the prevailing situation is a temporary transition and things are likely to get better over the next 30 days with the onset of the flush season by mid-April.
Moderation by June-July
Chandramogan said due to the Covid-led demand destruction, farmers had shrunk supplies as prices had crashed two years ago. As a result, the animals were underfed during that period. “All of a sudden, the demand picked up last year, but the animals couldn’t cope up. It takes five to six months for the animals to re-coup. Normally, the flush that we used to have between May and December, has been a lean period last year. The stocks that are normally built up during flush for the off-season have not happened. The prolonged lean period is also giving symptoms that the flush may start a little early this year. In my opinion, the flush may start by April 15 and we may see some moderation of prices by June-July,” Chandramogan said.
Another factor that has contributed to the current situation is the export of butter, which led to a depletion of stocks. As international butter prices were higher, producers probably resorted to exports to take advantage of the prices. About 20,000 tonnes of butter were exported, which is hurting us, Chandramogan said, adding that there is no concern on the skimmed milk powder (SMP) front.
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Private players pay more
Maintaining that there is no shortage of milk, sources at the Karnataka Milk Federation (KMF), the country’s second-largest dairy co-operative, said the daily procurement this year was two per cent lower than compared with the year-ago period. At the same time, the sales of liquid milk and curd put together have been higher by about 20 per cent, KMF said.
KMF sources attributed the decline in daily procurement to the fact that farmers may be selling their milk to private dairy players in Karnataka, who are paying a higher price. While a farmer gets ₹35 per litre (including a subsidy of ₹5 being paid by the Karnataka Government), the private dairy players have been paying ₹38-40 per litre.
Bhupendra Suri, CEO, Creamline Dairy Products, the dairy business of Godrej Agrovet, said the liquid milk shortage is building up across the industry amidst a higher demand. Further, a lack of proper flush last year, which resulted in lower butter and SMP stocks, compounded the situation.
Suri sees a slight easing of the situation in June-July with the onset of flush, while the main easing was expected during the October-December period. “The shortage is there and the situation is expected to continue for some months like this,” he said.