Indian dairy farmers fared better than their global counterparts in FY16
Indian dairy farmers were a lucky lot in 2015-16. While farm prices of milk dropped worldwide with farmers in leading countries like New Zealand and Australia getting 20-60% lesser on an average, the Indian dairy farmer got more than the previous fiscal.
In some states like Maharashtra, prices had fallen from Rs 25 per kg to around Rs 18 per kg. However, in some others like Gujarat, prices grew by 10% year-on-year. Gujarat’s leading dairy cooperative, the Gujarat Cooperative Milk Marketing Federation (GCMMF), which owns the brand Amul, is paying Rs 580-600 per kg fat to its farmers at the moment. The dairy behemoth procures close to 16.2 million litres of milk per day.
On the whole, average farm prices in India have grown for dairy farmers. As data from the National Dairy Development Board pointed out that average farm prices across India grew from Rs 25.73 per kg in FY15 to Rs 26.3 per kg in FY16. Even private dairy players like Parag Milk Foods in drought-hit Maharashtra said that the fall in prices was for a brief period, and procurement prices are ruling around Rs 24 per kg at the moment.
An NDDB offficial added that prices have only dipped in states like Maharashtra and Uttar Pradesh which have many private dairies and a loose milk market. In states where cooperatives have a stronghold, farmers continued to get better prices. “In fact, wherever cooperatives have been active, farmers could sail through drought, banking on additional income from dairy,” said a senior NDDB official.
RS Sodhi, managing director of the GCMMF, said: “Farmers in Gujarat have been getting 10% more at least for their milk, whereas the situation globally is quite bad. Farmers are getting lesser farm prices in the range of 20-60%. The situation is particularly bad in New Zealand.”
Earlier in May, Australia’s largest dairy processor Murray Goulburn had announced that it would cut the price it pays its farmer suppliers from $5.6 per kg of milk solids to $4.75-5 per kg. As per reports in international media, Murray Goulburn’s main rival, New Zealand’s dairy processor Fonterra, too, cut prices to its Australian suppliers from $5.60 per kilogram of milk solids to $5.
Another processor, Lion Dairy and Drinks, too, has cut prices in Tasmania, South Australian and some other regions. Media reports have suggested that Murray Goulburn farmer suppliers have said the retrospective price cut cost them two year’ worth of income.
Milk production is likely to fall by 2% this season in Australia, and a further 2-5% next season as farmer confidence levels are low. Milk production this year is expected to be to 9.55 billion litres, 2% less than in 2014-15, and way down from the 2000 peak of nearly 11 billion litres.
Analysts feel increasing production by major exporters like the US and the EU will slow down recovery in the global market. Global skimmed milk powder (SMP) prices are ruling around Rs 120-130 per kg, which is lower than the domestic SMP price in India (around Rs 150 per kg at the moment).
Despite almost nil dairy exports last fiscal which meant that the local market was flush with supply, prices to farmers have remained stable in India. This is mostly due to the steady rise in demand for value added dairy products as well as liquid milk. In volume-terms, the dairy industry grew 4% annually in the five years ended fiscal 2015, while the organised sector grew twice as fast. The volume of milk processed from organised sector is expected to grow 13% annually by fiscal 2018, way ahead of a 5% annual growth for the industry at large.
India ranks first in milk production, accounting for 18.5% of world production, achieving an annual output of 146.3 million tonnes during 2014-15, compared with 137.69 million tonnes during 2013-14, recording a growth of 6.26%. In 2015-16, the total production is estimated to be around 160 million tonnes.