Milk price in India plummeted in a month

The dairy sector in India has entered a crisis. In the country (with the largest milk lake in the world), dairy processors are flooded with supply, causing the milk price to plummet in 1 month.

In several parts of India, the milk price has dropped considerably. In Morena and Bhind districts, the situation is so dire that farmers have protested. For example, the milk price in Morena has fallen by 14 rupees (RS) to 24 Indian rupees in the past month. This equates to €0,31 per litre. For many dairy farmers this level is not sufficient. The price decrease is due to 2 reasons: too much milk and low prices for skimmed milk powder.

Too much milk
In some parts of India, private processors have stopped collecting milk. As a result, cooperative dairy farmers are suddenly supplied with 20% to 30% more milk. There is little or no processing capacity for these extra liters.

The root cause of the problem lies in world market prices for skimmed milk powder. A few years ago, these were still above $4.500 per tonne in the United States (US). However, in early 2018, skimmed milk powder in the US is trading between $1.600 and $1.700 per tonne.

Stocks up
The Indian Ministry of Agriculture has recently mandated cooperative dairy processors to continue to collect and process all milk. The stocks of skimmed milk powder are therefore likely to rise steadily: from over 117.000 tons in January to 200.000 tons in March. The milk price at the cooperative dairy processors has remained reasonably stable until now. The question is whether this will remain so in the coming months, given the dire situation that is developing.

Indian dairy sector
India has had the world's largest pool of milk for years (160 million tons in 2017, compared to 155 million tons in the EU-27). In terms of exports, the Indian dairy sector hardly plays a role in the world market. Most of the production is in the hands of small family farms that often only have a handful of cows.

1 Indian rupee = €0,013

Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness. He also focuses on dairy, pig and meat markets. He also follows (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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