Global skim milk powder (SMP) prices have hit a 11-month high, which is positive news for Indian dairies and farmers who have borne the brunt of an export market collapse in the last two years.
SMP rates at GlobalDairyTrade, the fortnightly online auction platform of New Zealand’s milk processing giant Fonterra, averaged $ 2,224 per tonne on September 6, up 9.7 per cent over the $ 2,028 price in the previous auction on August 16 and marking a third consecutive round of increase. Prices have significantly recovered from their low of $ 1,419 per tonne reached on August 4, 2015, though nowhere near the record $ 5,142 per tonne of April 2, 2013.
The uptrend in prices is good for India’s dairy industry, which has seen exports plunge from a peak of 1.30 lakh tonnes (valued at Rs 2,717.56 crore) in 2013-14 to a mere 15,930 tonnes (Rs 293.01 crore) in 2015-16. Lower export demand had led to domestic, especially private, dairies slashing milk procurement from farmers (About 11.5 kg of milk is needed to produce 1 kg of powder; a 1.1 lakh tonnes dip in powder exports would have, then, reduced milk purchases by some 35 lakh kg per day in 2015-16). As a result, farm-gate prices of cow milk fell to as low as Rs 15-16 per litre in states like Maharashtra, from Rs 25-26 during 2013-14.
That should change with international prices looking up on the back of production declines in New Zealand, Australia, Argentina and, of late, even Europe, coupled with apparently rising demand in China. SMP prices in India are currently ruling at Rs 140-150 per kg, which is on par with the latest GlobalDairyTrade quote of $ 2,224/tonne or Rs 148/kg.
“If prices show further rise in the coming auction rounds, we can expect exports to really take off. Dairies will also be able to get rid of their surplus powder stocks ahead of the flush season from October-November, when animals start producing more milk. And farmers, too, will benefit from higher demand,” an industry source said.