Dairy cooperatives and companies have increased milk procurement prices by Rs 56 a litre over the last three months to prop up dairy farmers and ensure steady supply of milk at a time when the sector is facing water shortage and higher fodder prices.
During the period, the consumer price of milk has risen by only Rs 2/litre, and is likely to remain unchanged if monsoon rains pick up pace and water availability improves, executives of several dairy companies told ET.
Water problem and increase in fodder prices have often been seen to lead to a decrease in milk production and increase in its price.
In addition to the increase in procurement price, these companies are likely to pay dairy farmers Rs 23/litre more because cattle feed prices have risen and monsoon rains are delayed. “There is still opportunity to increase farmers’ price by Rs 23 a litre, without impacting consumer price,” said RS Sodhi, managing director of Amul brand owner Gujarat Cooperative Milk Marketing Federation (GCMMF), told ET.
According to Sodhi, milk procurement prices have been increased by Rs 56/litre from March while consumer prices has been increased by only by Rs 2/litre.
“Farmers will be encouraged to produce more with this increase. Now, with commodity prices firming, farmers’ price too will increase. In the past one year, deoiled rice bran prices increased by 86% to Rs 16,700 a tonne, while corn gluten feed increased by 86% to Rs 21,400 per tonne, and maize by 54% Rs 21,600 per tonne,” said Sodhi.
The move, however, has reduced the margins for dairy, ice cream and cheese companies, the executives said.
“If monsoon rains pick up and water availability is good, then we should not expect
consumer price to increase. Else, another increase in price is on the card as there is no option,” said Rahul Kumar, managing director at Lactalis India. The French company owns Tirumala Milk Products, Anik Industries and Maharashtrabased Prabhat Dairy.
According to Kumar, milk procurement has fallen by 1015% compared with the previous year with the onset of summer.
Since the start of the monsoon season on June 1, rainfall deficit has been 36% below normal.
“It a grave situation, but we are expecting rains in Karnataka, Kerala and Tamil Nadu in a week’s time which might ease the situation. Even with increase in milk procurement prices, we have seen a drop inmilk supplies,” said RG Chandramogan, managing director of Chennaibased Hatsun Agro Products.
The price of skimmed milk powder (SMP) has risen to Rs 270 a kg from Rs 230 a kg in March, while the price of butter has increased from Rs 240 to Rs 290 a kg in the similar period, said Kumar. SMP is used for preparing liquid milk during summers when supplies are short.
According to Kumar, dairies have come under pressure after the Maharashtra government withdrew subsidy to milk farmers.