The New Year is set to bring smiles on the faces of dairy farmers in India

The New Year is set to bring smiles on the faces of dairy farmers, thanks to firm prices of the skimmed milk powder (SMP) following export incentives by the government.

Most co-operative dairies and private players were able to get rid of their excess SMP stock, which led to firming up of prices by at least 20 a kg in the past fortnight.

No shortage

A section of consuming industry, however, has claimed shortage of SMP as a reason behind sudden spurt in prices. They claimed that the dairies had reduced processing due to heavy losses in SMP last year and farmers stayed away from investing in additional cattle in the flush season causing supply shortage in certain areas. SMP prices increased from 195 to 220 a kg in recent trades.

However, industry leaders rejected the claims stating that price rise is a fall-out of exports and increased consumption and will ultimately benefit dairies and farmers.

“Last 2-3 years, SMP prices had declined significantly from 290 a kg to 130-140 per kg. This resulted in losses for farmers. So, they reduced buying or investing in new cattle. But with lower prices, consumption went up and now that the exports are happening with government incentives, we see prices improve. There is no shortage,” said RS Sodhi, Managing Director, Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF) — the marketer of Amul.

GCMMF has so far exported about 30,000 tonnes of SMP under the incentive scheme in past 2-3 months.

Prices rise

Notably, SMP prices had touched a peak of 290 a kg in 2014 but fell to as low as 130-140 a kg. On the advice of the National Dairy Development Board (NDDB), several States had also initiated the use of SMP for mid-day meal (MDM) scheme thereby increasing the consumption.

In June 2018, the Gujarat government had decided to provide 50/kg financial assistance for all SMP exports to be done by Amul for the next six months beginning from July 1. The ceiling for assistance was set at 300 crore. The government export data, however, compiled up to October 2018, doesn’t show any significant rise in the exports.

Global stocks, prices

Meanwhile, the glut situation appears to be over with stock position at about 80,000 tonnes in the country.

Even in Europe, SMP stock — which was about 3 lakh tonnes earlier — has come down to about 70,000 tonnes. The international SMP prices have shown a firm trend at $2,042 a tonne at Global Dairy Trade (GDT) auctions for December 18 — closer to the 12-month peak levels of $2,051.

At a higher domestic prices of 200-225 a kg, the dairy co-operatives are still unable to profit, as the cost of SMP production is 230 a kg.

Private sector dairy veteran RG Chandramogan, Chairman and Managing Director of Hatsun Agro, stated that with reduced exports over the past three years, India faced a glut situation in SMP followed by a crash in prices.

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