When in March 2017, Karan Atole took a Rs 14-lakh loan from the local cooperative credit society to buy 12 Holstein Friesian crossbred cows, build a shed to house them, and also invest in milking machines, cans, feed troughs and chaff cutters, little did he imagine that this business would drag him downhill in just over a year.
“Initially, it all seemed good and I expanded my herd to 28 animals, besides diverting two out of my family’s 18-acres land for growing fodder maize, jowar (sorghum) and napier grass,” says this 26-year-old farmer from Khandaj village in Pune district’s Baramati taluka. The Phaltan (Satara) plant of Heritage Foods Ltd, to which he supplied, was paying Rs 27 for a litre of milk with 3.5 per cent fat and 8.5 per cent SNF (solids-not-fat) content. The monthly revenues of Rs 1.5-1.6 lakh from selling 180-200 litres daily at this rate more than met his fodder and feed expenses of Rs 1.1-1.2 lakh. It could also cover the Rs 40,000 monthly installments on his five-year loan contracted at 14 per cent annual interest.
“My calculation was that once the loan was repaid and my milk sales grew simultaneously, this would become a standalone business to supplement our income from sugarcane,” notes Atole, who holds a diploma in mechanical engineering. All these hopes, however, evaporated, with milk prices dipping to Rs 22 per litre around May 2018. That rate has remained the same since, even as other dairies in the area — including the Baramati Taluka Cooperative Milk Producers’ Union — are giving just Rs 19 per litre.
At Rs 22 per litre, Atole’s monthly income of Rs 1.2-1.3 lakh from the same 180-200 litres leaves him with hardly Rs 10,000 — which cannot cover even the Rs 17,000 salary of the full-time labourer he has engaged at the dairy farm, leave alone the Rs 40,000 loan installments. “I thought dairying would reduce my dependence on sugarcane. Instead, it has only gone up, even though the sugar sector itself is in crisis. The Malegaon cooperative mill has paid us just Rs 2,215 per tonne this time, as against Rs 2,900 in the 2017-18 crushing season,” he remarks.
Moreover, things could worsen in the next couple of months due to intensifying drought conditions. “Right now, there is enough green top leaves from my cane. Also, the fodder crop that I grow can meet the requirements of the heifers, calves and other non-milking animals (at any given point, only 10 out of his 28 are in milk). But in about a month’s time, even that will become difficult and I may have to sell all my animals,” sighs Atole. There is little consolation that the prices of crossbred cows, too, have collapsed along with that of milk, from Rs 60,000-80,000 to Rs 30,000-40,000, in the last two years.
The only ray of hope for farmers like Atole is a recovery in the international prices of dairy ingredients, especially skimmed milk powder (SMP). The average rate of SMP at globaldairytrade — the fortnightly online trading platform of New Zealand’s dairy giant Fonterra — was quoted at $ 2,534 per tonne on February 6, a sharp jump from the $ 1,932 level a year ago. Maharashtra dairies are predominantly in the commodity ingredients business, as opposed to the likes of Gujarat Cooperative Milk Marketing Federation (GCMMF) and the Chennai-based Hatsun Agro Product Ltd, which derive bulk of their revenues from sale of branded liquid milk and ice-cream that are less prone to price volatility.
“We want to pay our farmers more, but how is it possible when dairy commodity prices have been so low over the last two years?,” asks Sandeep Hanumantrao Jagtap, chairman of the Baramati Taluka cooperative, which procures 2.5 lakh litres per day of milk. Of this, it sells only 45,000 litres as liquid milk in pouches under its own ‘Nandan’ brand and supplies the rest to private dairies such as Indapur Dairy & Milk Products and Schreiber Dynamix Dairies. They are paying only Rs 21.5 per litre to the cooperative, which is, in turn, procuring from its farmers at Rs 19.
R S Sodhi, managing director of GCMMF, believes that the worst is over for the industry. “SMP rates have risen in the last five consecutive rounds of globaldairytrade auctions. The European Union has sold practically its entire 3.8 lakh tonnes (lt) intervention stocks accumulated over the last three years (through conversion of surplus milk bought from farmers into powder). India’s own SMP stocks were over 2.5 lt in April 2018. These will dwindle to below one lt in the coming April,” he tells The Indian Express. Domestic SMP prices have already climbed from Rs 140 to Rs 200 per kg levels. These could go up further with the onset of summer and the effects of the ongoing drought in Gujarat and Maharashtra showing up in fodder supplies.
The liquidation of domestic SMP stocks has happened partly via exports, with GCMMF alone shipping out 30,000-odd tonnes in the last six months and Maharashtra dairies doing another 10,000-12000 tonnes. These have been helped by higher global prices, the rupee’s weakening and a 10 per cent ‘Merchandise Export from India Scheme’ incentive announced by the Centre in July 2018, This was on top of the Gujarat government coming out with a Rs 300-crore package to push milk powder exports from the state in June.
But the benefits of all these are yet to trickle down. “SMP rates will have to remain at the current levels for the next three months to enable us pay higher prices to farmers,” observes Rajiv Mitra, managing director of the Phaltan-based Govind Milk & Milk Products Ltd. Dashrath Mane, chairman of Indapur Dairy, too, does not rule out procurement prices going up by Rs 1-2 per litre “in the near future”.
For Atole and other farmers, though, that might be too late and too little. “By the time prices improve, we would already have sold most of our cows. Even the ones remaining that have been underfed for so long will not overnight start producing more milk,” warns Atole.