After sugarcane, rubber and cotton, dairy farmers are now feeling the heat from the crash in global commodity prices.
Private dairies in North India — which primarily manufacture skim milk powder (SMP), ghee and other bulk products — are now paying farmers Rs 30-31 per litre for buffalo milk against Rs 39-40 a year ago.
In Maharashtra, dairies are getting cow milk delivered to the plants at Rs 20-21 per litre. If they procure it from the farm, they pay Rs 18-19. A year ago, these prices stood at Rs 29-30 and Rs 26-27 per litre, respectively.
Buffalo milk is costlier due to higher fat: 6.5 per cent against 3.5 per cent in cow milk. The solids-not-fat (SNF) content in both is almost the same at 8.5 per cent.
“Kisan pareshan hain (the farmers are worried)”, admits Dashrath Mane, chairman of Indapur Dairy and Milk Products. The industry, however, blames the situation on world prices. SMP rates at GlobalDairyTrade averaged $2,467 a tonne on April 1, down from $4,126 a year ago and the peak of $5,142 two years ago. While milk per se isn’t globally traded, the solids from it — SMP, fat or even cheese and butter — are. In 2013-14, India exported nearly 1.3 lakh tonnes (lt) of SMP valued at Rs 2,717.56 crore. During the fiscal just ended, hardly 30,000 tonnes got shipped out. Low global prices, apart from rendering exports difficult, have impacted domestic market sentiment as well. Dairies are selling SMP at around Rs 180 per kg at present, against Rs 270 a year ago. Ex-factory prices of ghee have similarly dropped from Rs 310 to Rs 260 a kg.
“During the export boom, we could afford milk prices of Rs 40/litre. But at today’s realisations, we have no option but to reduce procurement prices”, says Kuldeep Saluja, managing director of the Sterling Agro Industries Ltd.
At Rs 180/kg SMP and Rs 260/kg fat price, dairies would realise slightly over Rs 3,300 from processing 100 litres (103 kg) of buffalo milk containing 6.5 per cent fat and 8.5 per cent SNF. After excluding Rs 200-250 of processing and packaging costs, they can barely pay Rs 3,100 or Rs 31 per litre for milk delivered at the dock.
India produces an estimated 6 lt of SMP annually, equivalent to about 70 lt of milk. Of the total 6 lt of SMP, roughly 4.5 lt is produced by private dairies in North India and Maharashtra. The balance is by cooperatives and South-based firms like Hatsun Agro Product and Heritage Foods, which into branded milk marketing.
“Exports falling from 1.3 lt to 30,000 tonnes would leave a surplus of 1 lt. Without any outlet for this powder, either through exports or a government-mediated commodity grant aid programme for our South Asian neighbours, there will be a glut. The ultimate victim would be the farmer”, notes R G Chandramogan, chairman of Hatsun Agro.
Mane wants the Centre to restore incentives for SMP exports. “We availed a 5 per cent duty credit entitlement (on the free-on-board value of exports) under the previous government’s Vishesh Krishi and Gram Udyog Yojna scheme. This facility was unfortunately scrapped last July,” he says.
The farmer’s loss from all this may be the consumer’s gain. Between May 2010 and May 2014, retail prices of toned milk in Delhi went up from Rs 23 to Rs 38 a litre — a 65 per cent jump in 4 years. But since then, there has been no rise and the scope for it is also limited in the “near future”, according to R S Sodhi, MD of Amul, which last raised prices on May 9, 2014.