Milk prices fell in 2014-15 on the back of lower SMP and ghee prices

Calculation of commercial milk producer prices:

• Dairies classify milk into two categories – cow milk and “mix” milk.Buffalo milk is considered as mix milk.
• Mix milk should have a solid-not-fat (SNF) content of 9 per cent. No deduction from the price is made if SNF content is up to 8.6 per cent.
  • Deductions for lower SNF content are up to Rs. 0.50 (if below8.3%).
  • Buffalo milk with SNF less than 8.1 per cent is classified as substandard milk.
• In case of cow milk, the standard SNF content is 8.3 to 8.5 per cent.
• The milk price before adjustment for SNF quality is calculated based on the price of the fat content of the milk
• In June 2009, the price of fat being paid was around Rs. 320 per kg of fat. In mid-2011, it was in the range of Rs.380-425 per kg of fat.
• In June 2012, it was in the range of Rs. 450-480 per kg of fat. In June 2013, prices were around Rs. 470 per kg of fat. In May 2014, price was about Rs. 570 per kg of fat. In July 2015, prices had fallen to about Rs. 550 per kg of fat.

Milk producer prices evolution 2008-2015:

1. Prices paid to farmers have increased substantially since 2008 but have fallen during the past year. Even after the fall, a price of Rs. 550 (USD 8.8 at the end May 2015 exchange rate) per kg of fat implies a price at levels similar to those in Western Europe.
2. This is doubtless one of the main reasons explaining the sustained high growth of milk production.
3. The increase in prices of milk during recent years had been caused both by increases in input costs and by shortages of milk due to increasing demand unmatched by supply. The fall is on account of low prices of SMP and Ghee on cues from the global markets.

 

Milk Prices paid to farmers Recent fall in prices likely to be short-lived

There is no one national (or even regional) price paid by dairies for milk.

• The milk price varies, depending on the degree of added value that the dairy can realise by selling its products, and on the degree of local competition for the milk.

Milk producer prices evolution 2005-2015:
During 2005-06 prices rose by 2.5%, 2006-07 -8.5%, 2007-08 -6.3%, 2008-09 -11.7%, 2009-10 -27.9%, 2010-2011 -2.9%, 2011-12 -15.7%, during 2012-13 by 4.04%, during 2013-14 by 9.2% and during 2014-15 by 7.4%. During 2014-15, prices rose for the first four months and have been either stable or fell thereafter. The average rise during the past 10 years has been 9.6% p.a.

1. Milk prices started rising very steeply from the first quarter of 2009. There was some slowdown in growth during 2010-11 but prices rose again sharply in 2011-12. The continuous rise in prices has moderated in the H2 of 2014 and H1 of 2015.
2. Milk prices increased at 7.4% and ghee prices by 11.95% during 2014-15 as against price rise of 5.7% for food products in general and a fall of 2.7% for all commodities.

• Cooling of exports and softening of global prices have contributed to recent decrease in prices.

Likely milk price trend towards 2019:

• Milk prices will continue to rise. Rises of over 7% p.a. can be expected.
• It is generally expected that milk prices will rise more than the rate of inflation in India.