Retail milk prices rose 15% in past year, highest in a decade

Retail milk prices rose 15% over the past year, the fastest pace in a decade, and could increase further this summer, analysts said, citing higher fodder prices, a shortage of milch cattle due to an epidemic and a slowdown in productivity in the world’s largest milk producer.

Retail prices were increased several times to keep prices paid to farmers above their cost of production, said an official of the Gujarat Cooperative Milk Marketing Federation (GCMMF), which owns the Amul brand.

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One in three households reduced consumption and spending on milk due to rising prices, consumer survey firm Local Circles said in a recent review.

In February, Amul raised milk prices by ₹3, the fifth increase in a year. Branded milk prices are competitive and a litre of full cream milk now retails at ₹66 in the national capital, while the toned variety costs ₹54. Retail inflation in milk rose 9.65% in February, against 8.79% in the previous month, the largest increase after cereals.

In the year ended March 31, milk output is estimated to have risen 1% compared to an average annual increase of nearly 6% over the past decade, the GCMMF official said, declining to be named. India is the world’s largest producer of milk, with an estimated output of 221 million tonne in 2021-22.

A global cereal shortage due to the Ukraine conflict had led to higher exports of broken rice and wheat remnants from India, leading to feed shortages. This stoked prices of maize. In all, fodder prices rose nearly 21% since 2021.

Lumpy skin disease, a deadly viral infection, assumed epidemic proportions last year and is estimated to have killed nearly 185,000 cows and buffaloes in eight states.

“The main reasons for price increase are an increase in fodder prices and cattle itself. Other than in Gujarat, milk procurers paid less than the cost of production to dairy farmers,” said RS Sodhi, president of the Indian Dairy Association and former managing director of Amul.

A demand-supply mismatch soon took hold amid rising post-pandemic demand from commercial buyers. The more lucrative sales come from what is called the horeca segment, an industry acronym for hotel, restaurant and canteen sales.

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“As the epidemic raged, farmers reared fewer calves and limited herd size for breeding. Major seasonal cattle markets in states such as Rajasthan were called off as restrictions were placed to stop the epidemic,” said Rajesh Sharma, a dairy development officer in Sikar, Rajasthan, a major milk producer.

To tide over shortages, import of milk powder from Europe jumped $4.56 million from a year ago, according to data from National Dairy Development Board, stoking prices.