After 4-yr slump, dairy exports achieve second best show on global deficit

April 25, 2019

Dilip Kumar Jha  |  Mumbai 


After four years of slowing down, India’s dairy exports have revived to achieve the second best show ever in financial year 2018-19 due to supply deficit-led global price increase in skimmed milk powder (SMP) and other milk derivatives including ghee and butter.

Data compiled by the Agricultural & Processed Food Products Export Development Authority (APEDA) showed India’s total exports of dairy products were worth $404 million between April 2018 and February 2019, up 56 per cent from $260 million in the comparable period last year. Experts believe dairy exports continued with an estimated worth $100 million in March and total FY19 export is estimated to have surpassed $500 million, the second highest after the record of $728 million set during the FY 2013-14.

“Exports of SMP, butter and other derivatives continued in March as well. Even we have exported around 30,000 tonnes of SMP in March. Other dairy companies have also exporter a large quantity of SMP to the international markets which we believe will continue in coming months as well. SMP prices have increased significantly in both domestic and international markets during the last two months,” said R S Sodhi, managing director, Gujarat Cooperative Milk Marketing Federation which sells Amul brand liquid milk and its derivatives.


SMP prices which had declined to $1800 a tonne in the international market until recently, have now recovered to trade at around $2200-2300 a tonne. The Food and Agricultural Organisation (FAO) of the United Nations in its latest report has posted 6.2 per cent sequential increase in its Dairy Price Index for March 2019 registering a third consecutive monthly growth. In March, international prices of butter, whole milk powder and cheese rose, uniderpinned by increased import demand in anticipation of a tightening in export availabilities on a seasonal decline in milk production.

In domestic market also, the benchmark SMP prices have jumped by around 25 per cent or by Rs 60-70 a kg to trade at Rs 230–240 a kg now. Interestingly, domestic demand of SMP has been on the rise for over five months due to unavailability of inventory in the pipeline. Sodhi forecasts SMP prices to hit the lifetime high of Rs 290 a kg that by June-end.

Fats prices in the international markets have also increased significantly by upto 33 per cent in the last two months. Prices of white butter jumped to trade at Rs 280 a kg now from Rs 210 a kg in March. Ghee prices have also jumped by 10 per cent to trade at Rs 340 a kg now from the level of Rs 208-300 a kg in March. Ghee prices have jumped by 20 per cent in the international market to trade at $6000 a tonne now.

“Milk prices have increased by Rs 1.5–2 a kg the past two months. Rising prices of SMP in the market have not impacted our cost of production as we do not purchase from the market. We are keeping a close watch on the price trends but do not envisage any hike in selling prices in near future,” said a Mother Dairy spokesperson.

Meanwhile, scenario is precarious for farmers in Maharashtra due to the lack of fodder and water. Farmers are selling their milking animals to their counterparts in the other states. Consequently, milk supply in the state has deteriorated. Rising fodder prices including maize, oilmeals and rice bran have worsened their animal husbandry affordability.

“There is a huge water scarcity in Maharashtra. Milk supply is getting squeezed resulting into demand led price increase of dairy products,” said Amitabha Ray, Managing Director, Schreiber Dynamix Dairies which sells Dynamix brand dairy products.

Experts, however, believe that milk procurement prices in Maharashtra have increased by Rs 6 a litre to Rs 26-27 a litre which may squeeze profitability of dairies in the state.


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