Inside Milk
Another setback for milk powder price
Once again, there are developments that cause a setback in the recovery of the price for milk powder. India is hitting a record in milk supply, causing prices to collapse and the country struggling with a surplus. This surplus must now find its way to the world market.
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Dairy farmers in India managed to produce 2017% more milk in the 2018/6,6 season. It produces a milk supply of 176,4 million tons, but that is not yet the highest point. The milk supply could peak in the 2018/2019 season and reach a volume of 186 million tons.
Substantial discount on milk price
Yet it is bad news, because milk production has grown so quickly that a surplus has arisen. As a result, milk prices have fallen rapidly; in the last 18 months the price fell by 20% to 25%. This increases the unrest among livestock farmers. In various places it was the reason for livestock farmers to take to the streets and take action.
25
percent
It does not (yet) look like peace will return any time soon, due to the dynamics in milk production. Typically, supply in India peaks in October, meaning surpluses will only continue to increase. The India Progressive Dairy Farmers Association is calling for direct milk price support and subsidy for milk powder exports.
Support for the sale of milk powder is requested, because processors convert most of the surplus milk into milk powder milk powder. The global market is then needed to absorb the additional volumes. However, there is a problem there, because the price in India is 40% above that of the world market.
Subsidy on exports
To boost exports, the western states of Gujarat and Maharashtra (the main producers) have started paying a subsidy of approximately $727,86 per tonne. The government goes the extra mile and gives a 10% subsidy on the export price. However, for a company like Amul it still means a loss of 15% per tonne, due to the relatively high production costs.
Rabobank, together with other experts, estimates that the export could grow from 11.500 tons (season 2017/2018) to 100.000 tons (season 2018/2019). By comparison, New Zealand is expected to export 410.000 tons and the United States exports 720.000 tons. In addition, the milk powder stock in the European Union must be added.
Butter bubble?
It appears that there will be no recovery in the price of milk powder in 2018 and 2019, despite the fact that the important milk-producing regions are being hampered by the dry and warm conditions. A price that is under pressure also means a brake on butter production. That could be the basis for a new one butter bubble.