Know the Fact of Dairy Sector Structural Overview

The impact of major changes on the dairy & dairy commodities sector Dairy markets, industry and companies

The national economy

  • India’s population of more than 1.2 billion is growing at about 1.3% p.a. GDP growth has returned to around 7% after being down for two years. Higher growth is likely to spur demand for milk and milk products.
  • Demand so far had driven up milk prices much faster than inflation. However, 2014-2015 has seen supply exceed demand with processors accumulating stocks of milk powders. Due to low international prices, exports have fallen. This is expected to be a short term situation. As demand picks up on the back of high growth, the country may be back to shortages. The country now produces more than 150 mio tons per annum of milk.

Regulatory and political

  •  GOI had permitted a limited quantity of duty-free import of milk powders and butter oil in 2011 and 2012. With the boost in milk production, imports ceased to be viable.
  • GOI lifted ban on export of dairy products in 2012. Exports of SMP picked up thereafter. The sharp upward growth in export volumes has been halted in 2014-15 with international prices of milk powders registering a steep fall.

Weather and the environment

  • Monsoon 2015 was expected to be below normal. However, progress of the monsoon till end-July 2015 has raised hopes. Actual rainfall may prove the forecasts wrong giving a boost to the Indian economy.

Dairy markets, industry and companies

  • The continuing growth of the middle classes means consumers want ever more and better quality dairy products.
  • Although India’s growth in the dairy sector was originally led by cooperatives, in the recent past, the private sector has been growing and may soon rise to a position of being able to challenge the coops.
  • Global dairy companies are taking a keen interest in Indian private dairy companies. Some large private dairy companies are eyeing significant investments from international PE Funds.

Source  : Girafood