In India, the dairy industry represents a vital part of the country’s agricultural landscape. The nation is the world’s leading milk producer, accounting for an impressive 26.64% of global milk production. However, despite a significant increase in production, from 187.3 million tonnes in 2018-19 to 236.35 million tonnes in 2023-24, there has been a disconcerting trend of rising milk prices. Major brands like Amul, Mother Dairy, and Nandini have implemented recent price hikes of approximately Rs. 2 per liter. To understand the reasons behind this surge, let’s explore the underlying factors contributing to the surge in milk prices in India.
Rising Input Costs
The rising milk prices are mainly attributed to the escalating input costs. Jayen Mehta, managing director of GCMMF (Amul), emphasizes that the recent price hike is essential to compensate farmers for the increasing production expenses. Mother Dairy shares a similar perspective, indicating that only a 3-4% price increase is passed on to consumers. This increase ensures a balance between the interests of both producers and consumers.
Cattle Feed Prices
The soaring prices of cattle feed since 2022 have significantly impacted milk production. Quality grains, bran, and molasses, crucial for cattle growth and milk yield, have become more expensive. The Tamil Nadu Agricultural University (TNAU) emphasizes that cattle require 2-3% of their body weight in dry matter. However, there’s a severe shortage of dry fodder, which accounts for up to 70% of livestock costs. Mainland regions face a 25% shortage, while northeastern states and Himachal Pradesh grapple with staggering shortages of up to 90%. This scarcity is primarily attributed to erratic monsoons and reduced agricultural land. Fodder, encompassing whole plants or plant parts used as livestock feed, has also been affected by unpredictable monsoons and diminishing agricultural land. These challenges have strained the availability and cost of cattle feed, directly influencing milk production costs.
Disease and Health Issues
Between 2022 and 2023, lumpy skin disease affected nearly a million cattle, leading to a significant decrease in milk production. This health crisis in livestock not only has immediate impacts on the milk supply but also contributes to an increase in milk prices.
Aside from health crises, higher fuel and packaging costs have further compounded milk production expenses. These increased operational costs are directly reflected in retail prices, impacting consumers.
Milk, being a perishable commodity, is heavily influenced by demand. As the population grows, so does the demand for milk. Unlike storable commodities such as wheat, rice, and dal, milk’s perishable nature prevents stockpiling to control prices. This dynamic creates constant pressure on supply chains to meet the ever-increasing demand, further contributing to price fluctuations.
Regional Consumption Patterns
Across different regions, spending on milk and its products fluctuates, impacting the overall demand trends. Prices undergo adjustments in response to shifting consumption patterns and fluctuating regional demands to reflect these dynamic changes in the market.
Impact on Family Budgets
The continuous rise in milk and milk product prices significantly impacts family budgets. Given the essential role of milk in the Indian diet, price hikes are felt acutely by households, straining financial resources and altering consumption patterns.
The recent rise in milk prices in India is a result of multiple converging factors. Escalating input costs, shortages in cattle feed, livestock health concerns, increased operational expenses, and the inherent demand-driven nature of milk as a commodity have all contributed to this situation. As we grapple with these challenges, it is essential to find a delicate balance between ensuring fair compensation for dairy farmers and maintaining affordability for consumers.
This situation is of great concern for leading milk and dairy product manufacturers in India like us. We are concerned not only about the availability of raw materials but also about the impact of the price rise on consumers. Although the reasons are strong enough to advocate the price rise, yet, a price control mechanism needs to be implemented.
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