Festive demand, rising prices of milk products help dairy farmers see recovery after Covid lows

NEW DELHI — International skimmed milk powder (SMP) prices have hit a seven-month high. That’s good news for Indian dairy producers, with the ‘flush season’ (when animals, particularly buffaloes, calve and produce more milk) taking off and domestic demand also improving ahead of the main festival period in October-November.

On Tuesday, prices of SMP at Global Dairy Trade (GDT), the fortnightly auction platform of New Zealand’s Fonterra Cooperative, averaged $2,889 per tonne. This was a 8.5 per cent jump over the previous auction rate of $2,663 on September 1 and the highest since $2,907 on February 4.

The price rise is being attributed to demand slowly returning, as Covid-19 cases are showing a deceleration worldwide and most countries have relaxed lockdown restrictions. There is also talk of large-scale imports by China, which has, of late, been stocking up other farm commodities too, including soyabean, corn, wheat, barley and sunflower oil.

“This is encouraging, but we need to see a couple of more auction results. Only then can a clear trend of recovery be established” said Rahul Kumar, CEO of Lactalis India, which owns Prabhat Dairy in Mumbai and Chennai-based Tirumala Milk Products Pvt Ltd.

SMP prices at the GDT auctions had crossed $3,000 per tonne in December-January, levels that were last seen in August 2014. The latest global price of $2,889 translates into around Rs 213 per kg, which is above the Rs 180-190/kg rates for SMP now being realised by Indian dairies.

Domestic SMP prices have already recovered from their lows of Rs 140-150 per kg barely two months ago. So have ex-dairy prices of butter (from Rs 200-225 to Rs 260-270) and ghee (from Rs 280-290 to Rs 340-350/kg).

“The market has somewhat picked up after Janmashtami (August 12) and also with hotels, restaurants and tea shops gradually resuming operations. This uptick should continue at least till Dussehra (October 25) and Diwali (November 14). And with global SMP prices going up, there would be opportunities for exports from India as well,” Ganesan Palaniappan, a leading Chennai-based dairy commodities trader noted.

All this should help dairy farmers, who had seen procurement prices of cow milk (with 3.5 per cent fat and 8.5 per cent solids-not-fat content) slide from Rs 31-32 per litre in March (just before lockdown) to Rs 18-20 till a month ago. Those prices have since improved to Rs 24-25 per litre.

The current demand recovery, both domestic and global, comes at an opportune time for farmers. Good monsoon rains have significantly boosted fodder availability. Calvings also generally start from late August, leading to milk production rising and peaking during the winter, while remaining high right till March-April. If milk procurement prices are better than what they were till recently, it would be a twin blessing for farmers.