In the last two years, the dairies have not been able to sell off their SMP stock due to falling global prices and dipping domestic demand.
Dairies across Maharashtra, which are facing a severe dip in daily milk procurement, have started increasing the procurement price for their farmers. Many dairies have said they will be forced to pass on the increased cost of production to the end consumer in the days to come.
For the last few months, dairy farmers in Maharashtra are being paid between Rs 20 and Rs 23 per litre for milk. The state government’s Rs 5 per litre subsidy, which was later reduced to Rs 3 per litre, was to ensure that the dairy farmer is paid at least Rs 25 per litre. But because of the state government’s delay in releasing the subsidy, the farmers’ actual realisation has remained in the range of Rs 20 to 23 per litre.
Usually, dairies convert the excess milk collected in the flush period — September to April — into anhydrous skimmed milk powder, which is a tradable commodity. In the last two years, the dairies have not been able to sell off their SMP stock due to falling global prices and dipping domestic demand.
But now, the USA’s Department of Agriculture has indicated that the demand for SMP may exceed supply, and this is bound to have a positive impact on the trade. The price correction may prompt the dairies to increase their procurement costs to procure more milk.
However, the drought in several parts of the state has affected the dairy trade, as farmers complain of non-availability of fodder and water for dairy animals. In the domestic market, as milk procurement dipped, the price of domestic skimmed milk powder (SMP) increased from Rs 130 per kg to the current Rs 230-240 per kg. On an average, milk procurement by dairies has dipped by 20 per cent across the state.
As supplies dry up, dairies have started increasing their procurement price to keep up their daily collection. The Kolhapur District Cooperative Milk Producers’ Union, Gokul, has increased its procurement price from Rs 23 per litre to Rs 25 per litre. With a daily procurement figure of around 12 lakh litres per day, this dairy giant supplies milk in pouches to Mumbai, Pune and many other parts of the state.
So that they can pay more to dairy farmers, the dairies may start increasing the price of retail milk pouches. Already, the Gujarat Cooperative Milk Marketing Federation, the owner of brand Amul, has increased the price of its pouches by Rs 2 per litre. The company, which earlier sold milk at the rate of Rs 44 per litre, is now retailing the same at Rs 45 per litre.
Vishnu Hingne, chairman of the Pune District Cooperative Milk Producers’ union, the owner of brand Katraj, said they will take up the issue of a likely increase in retail prices during their upcoming board meeting on May 29. “We will take a final call about this after looking at various market forces,” he said.
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