Explained: What are the factors driving the increase in milk prices?

Explaining the reasons, it said: “This price hike is being done due to an increase in overall cost of operation and production of milk. The cattle feeding cost alone has increased by around 20% compared to last year. Considering the rise in input costs, our member unions have also increased farmers’ price in the range of 8-9% over previous year.”

Fall in production

Dairies across the country are reporting a shortfall of 8-10% in milk collection, said Dasarath Mane, chairman of Indapur Dairy and Dairy Products Ltd that retails milk under brand name‘Sonai’. This Pune-based diary recently raised the price it pays to farmers.

“Our dairy is now reporting a collection of 20 lakh litres of milk per day, compared to 23 lakh litres per day in August last year. This shortfall is the main reason why we have raised our prices,” Mane said.

Rise in cattle feed cost

The reduction in milk yield has come on the back of rising cost of cattle feed.

Heavy rainfall in several parts of the country has resulted in lower green fodder yield, Mane said, adding: “Protein and mineral mixtures have also seen a rise in prices, which has increased the cost of cattle feed.”

Rajiv Mitra, CEO of the French dairy giant Lactalis Prabhat, said: “Cost of production of milk has gone up. Cattle feed cost alone has gone up by over 25%.”

Disease in cattle

Some major milk-producing states have seen a rise in cases of disease among cattle. Lumpy Skin Disease, which leads to fall in milk output, has been reported in Gujarat, Punjab and Haryana.

Other factors

There has also been a rise in transport, logistics, manpower, and energy costs.

“Due to the rise in input costs, milk procurement rates have increased by 15-25% over the same time last year,” Mitra added.

Demand-supply mismatch

The pandemic-hit dairy industry has reported a complete recovery. This year, the demand for liquid milk is also high compared to previous years. But most dairies in the country are short on their supply of skimmed milk powder (SMP) and white butter. Dairies have hinted at a further increase in milk prices before October, when production is expected to pick up.