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Explained: Why milk supply is tight and prices are up

The rise in milk prices reflects rising consumer food inflation, which in November touched 10.01%, the first time it has crossed single digits since December 2013.

By: Explained Desk | New Delhi |
Updated: December 18, 2019 12:12:26 pm
rising milk prices, why are milk prices rising, milk price up, indian express, mther dairy raises prices, Amul raises prices, why are amul mother dairy raising prices Mother Dairy, owned by National Dairy Development Board, has raised the maximum retail prices of their milk pouches by Rs 2 per litre.

On Saturday (December 14), the two dairy majors, Gujarat Cooperative Milk Marketing Federation (GCMMF), better known as Amul, and Mother Dairy, which is owned by the National Dairy Development Board (NDDB), raised the maximum retail prices of their milk pouches by Rs 2 per litre.

This was the second time this year that Mother Dairy and Amul have raised prices.

In Delhi NCR, the price of a litre of full cream milk has risen from Rs 46 on February 1, 2014 to Rs 56 now; while the price of a litre of toned milk has risen in this same period from Rs 36 to Rs 46.

The rise in milk prices reflects rising consumer food inflation, which in November touched 10.01%, the first time it has crossed single digits since December 2013. Both cooperative and private dairies have reported 4%-5% lower procurement so far this fiscal compared to 2018-19.

GCMMF unions alone, perhaps, for the first time, have recorded a 5%-6% drop in milk collection, despite paying Rs 100-110 more per kg fat to their 30 lakh-odd producers. Meanwhile, skimmed milk powder prices have roughly doubled to Rs 300 per kg levels in the last one year.

The reasons for the tightness in supply may be partly weather-related and partly structural.

The “flush” season for milk — when production by animals goes up due to better fodder and water availability, besides lower temperatures and humidity — is normally from October till March.

This time, the flush has been delayed because of excess rains from September through November.

“It has been raining intermittently, so much so that even the open fields where animals graze are waterlogged. The fodder isn’t coming up, as the water has to go down first for that. Now that the winter has set in and the rains have also subsided, the flush should take off,” the chairman of a leading South-based private sector dairy company said in a report published earlier in The Indian Express.

There are structural reasons, too.

According to R S Sodhi, managing director of GCMMF, the extended three-year period of low prices has resulted in farmers reducing herd sizes, and under-investing in animal nutrition and health. The cost of maize, cottonseed oil cake, de-oiled rice bran and other feed ingredients has also increased.

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