Milk to get costlier again? Dairy companies considering second hike in two months

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Updated: July 11, 2019 3:23:45 PM

While dairy players put a lot of hope on the June-September monsoon season in India, a subpar monsoon may fail their dreams yet again.

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While dairy players put a lot of hope on the June-September monsoon season in India, a subpar monsoon may fail their dreams yet again. The same could translate into higher milk prices soon, as dairy farmers and dairy industry trying to cope with rising fodder prices and the subsequent hike in milk procurement price. While some of the dairy players such as Amul and Mother Dairy have recently increased raw milk prices stating farmer interest in mind, it remains to be seen if others will follow suit; or even if Amul and Mother Dairy go for the second round of price hike.

“Due to the delay in the monsoon, the raw milk prices paid to farmers have been going up. However, we are optimistic that in the next couple of weeks, rains will cover wide-spread geography and will result in an increase in milk production and flow. We are monitoring the situation very closely and will act basis the circumstances,” a company spokesperson for Mother Dairy Fruit & Vegetable Pvt Ltd told Financial Express Online. The company, however, did not comment on as to what happens if the monsoon continues to disappoint.

Parag Milk foods echoed what Mother Dairy said and enumerated the issue. “With prolonged summers and delayed monsoons, feed was in short supply since last month and that created a shortage of milk leading to further increase in raw milk prices,” Devendra Shah, Chairman, Parag Milk Food Ltd, told Financial Express Online. However, the company remains optimistic of the monsoon results and said that with arrival of monsoons in most parts of the country and feed situation easing, it is looking at normalising milk prices over next 1-2 months, Devendra Shah added.

India is home to many regional and pan-India players in milk, and the feasibility of the segment can be vouched for by the entry of foreign players such as New Zealand based-Fonterra group which recently jumped into the highly competitive dairy market. However, the industry is facing issues such as rising cattle fodder prices, which is shrinking margins. The rise in milk prices is to help the sustenance of dairy farmers, Amul and Mother Dairy has recently said referring to the hikes. “After all, without incentives, why would dairy farmers continue to produce more milk?”, Amul MD RS Sodhi had said in May, which was followed by a milk price hike.

What caused price hike in last months?

Till recently, no major increase in raw milk price was seen for two years. But then things changed. After Amul raised its raw milk prices by Rs 2 per litre, it said that the rising costs to feed the cattle and labour “have raised the cost of milk production”. Mother Dairy too reiterated the same and said that fodder costs have jumped 15-20%. However, Parag Milk Foods said feed prices increased by around 50-60% in short span disturbing vitality of the farmers. “This was fuelled further with higher commodity prices in the country. The cumulative effects of these factors lead to increased milk prices in the past couple of months,” Devendra Shah told Financial Express Online. 

Meanwhile, queries sent to Amul co-operative remain unanswered. Future Fonterra (Future group’s joint venture with Fonterra) declined to comment on the queries sent by Financial Express Online.

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