Harish Damodaran

New Delhi, Sept. 9 Speculation over a possible extension of the ban on skimmed milk powder (SMP) exports beyond this month has led to a crash in milk prices.

Private dairies in the North are currently paying Rs 15-15.50 for a litre of buffalo milk containing 6.5 per cent fat and 8.5 per cent solids-not-fat (SNF) delivered at their dock. The same milk was being sourced at Rs 19-20 a litre in July.

“We have seen a drop of around Rs 4 a litre in the last two months. Over the last week alone, prices have gone down by roughly Rs 1.50 a litre,” said Mr Kuldeep Saluja, Managing Director of the Delhi-based Sterling Agro Industries Ltd.

He attributed the fall to the decline in realisations from products and speculation over the ban on SMP exports continuing beyond September 30.

SMP is now fetching Rs 105 a kg, against Rs 145 in July. Over the same period, ghee prices, too, have reduced from Rs 155 to Rs 125 a kg.

“When product prices fall, we have no option but to offer lower milk prices,” Mr Saluja added.

All the big northern private dairies – Sterling Agro (‘Nova’ brand), VRS Foods (‘Paras’), Bhole Baba Milk Food Industries (‘Krishna’) and SMC Foods (‘Madhusudan’) – are currently operating at 40-50 per cent capacity.

“Even at Rs 105 a kg, there are no takers for SMP. Everybody expects prices to dip further and see no reason to buy now. If the export ban does not go by September-end, we are in for real trouble,” claimed Mr Saluja. If a dairy were to process 100 litres of buffalo milk or 103 kg (one litre equals 1.030 kg), it would get about 6.6 kg of ghee and 8.6 kg of SMP.

The combined realisation from both at present prices would work out to around Rs 1,730. If conversion costs at the rate of Rs 2a litre are deducted, the net realisation (without accounting for depreciation, interest and other expenses) drops to Rs 1,530.

Thus, even paying Rs 15 a litre would not be really feasible – and impossible if SMP prices dip to Rs 90 levels.

The Managing Director of the Gujarat Cooperative Milk Marketing Federation (GCMMF), Mr B.M. Vyas, said that unlike the private dairies, it is not keen to lower prices paid to farmers.

“Since our portfolio is tilted more towards liquid milk and branded dairy products, we are not as much affected by the dip in SMP and ghee prices. But if the present trends continue, we may have to consider declaring a milk holiday and asking our producers not to supply one day of every week,” he noted.

If the ban on SMP exports, in place since February, is lifted, dairies would be able to realise upwards of Rs 160 a kg. With New Zealand powder for November being quoted at $4,300 a tonne, Indian SMP would fetch about $4,100 free-on-board.

More Stories on : Dairy & Dairy Products | Exports & Imports

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page