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Know The Fact about Milk Pool and Dairy Products,Butter & Ghee – Growing Domestic Demand; SMP – Exports fall

Milk production:
1. Domestic production was 143 million tons in 2014. Production is expected to continue to grow at > 6% per annum on back of demand pull and high milk prices.
2. Increase in milk production is coming from increase in animals as well as from improvement in yield by way of breed improvement programmes supported actively by Government.

Milk yields:

• Milk yields are among the lowest in the world

In 2014, average yield of a cow was 1,377 kg per year and of a buffalo was 1,835 kg per year.
1. Cow yield has been increasing at about 2.9% per annum over 2004-14.
2. Buffalo yield has been growing at about 1.6% per annum over 2004-14.
• In the past, efforts to improve cow genetics were focused on crossbreeding with imported breeds. In a major shift, GOI is now focusing on elite indigenous breeds to improve both cows and buffaloes.

Milk prices:  

• During 2014-15, milk prices have fallen moderately. Many processors have reduced the price paid to farmers. This has happened because of fall in global prices making exports of SMP unviable. Retail prices of liquid milk have remained unaffected while prices of some milk products have fallen.

Recent movements in the main dairy products: 

  • Butter & Ghee – Domestic market of ghee is growing steadily at about 7% per annum, while table butter grows at 15%. Exports of butter and ghee are stable and have not been affected by fall in global prices.
  • SMP – SMP is used in India largely for reconstitution as liquid milk during summer months when milk production falls. SMP exports rose through 2012 and 2013 on back of high global prices, but have fallen in 2014-15 with the fall in international prices. At the end of March 2015, dairy cooperatives were estimated to be sitting on stocks of 90,000 tons of SMP. Huge stocks of SMP have acted as dampener on milk prices.
  • Liquid Milk – Reduction in export volumes and the resultant reduction in milk procurement prices has made the business of selling liquid milk in pouches etc. profitable. Liquid milk retail prices have been stable even though procurement prices have been reduced.

Imports & Exports

  • Butter & Ghee – India imports small quantities of dairy fats (about 1,000 tons) while exporting significantly large quantities (about 9,000 tons). Exports have grown steadily at about 9% per annum during 2004-14, while imports have fallen by about 9% per annum during the same period. Indian butter and ghee has been able to generate loyalty in some markets making exports independent of price fluctuations in global dairy fats market.
  • SMP – India is an opportunistic seller / buyer of SMP. When global prices are high, India enters as a seller and exits as soon as prices fall. SMP imports / exports are used to bridge the gap between domestic supply and demand.