REVERSED! Milk price in India soars; you can blame your higher money spending on this reason

Milk price in India today is rising. Milk price generally falls during winter because its production tends to rise in these cold months when calvings by buffaloes peak. However, in the current 'Flush Season' (October to March), milk dairies are being forced to pay more for the milk as supply didn't peak as it used to happen during the previous seasons. As a result, prices of milk products have risen this winter. If we look at the global market indicators, the milk and milk product prices are expected to further shoot-up in the months to come.

On 19th January 2021, skim milk powder (SMP) prices at Global Dairy Trade (GDT), the fortnightly auction platform of New Zealand’s Fonterra Cooperative, averaged $3,243 per ton, which is highest since the $3,264 of August 5, 2014 price.

In the domestic market too, dairies are selling SMP at Rs 245-255 per kg, as against Rs 180-190 in September and the Rs 140-150 lows touched in July 2020. Even more striking is the recovery in milk fat prices. If we go by the dairy commodity market players, ex-factory rates of cow butter and ghee are ruling at Rs 305-310 and Rs 400 per kg, respectively. These are up from their corresponding levels of Rs 260-270 and Rs 340-350/kg in September and Rs 200-225 and Rs 280-290 in July.

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All this is reflected in milk prices as well. Maharashtra dairies are procuring cow milk (with 3.5 per cent fat and 8.5 per cent solids-not-fat content) at Rs 27-28 per litre, compared to Rs 24-25 in September and Rs 18-20 in July.

The dairy commodity experts are of the opinion that the reversal in seasonal trend at present is basically due to the lag-effect of the COVID-19 induced lockdown that forced the closure of hotels, restaurants and food joints, hostels and canteens, apart from cancellation of marriages and other public functions. The demand destruction and price crash from it resulted in farmers underfeeding their animals.

Experts are of the opinion that above mismatch could increase in the coming days due to three reasons — first is that very few dairies are today holding enough stocks of powder and fat; second is international prices, which make exports more viable than imports and the third reason is the COVID-19 induced lockdown making it difficult for the farmers to access artificial insemination services.