Dairy farming is a most profitable activity in India and the world
Dairy farming is a most profitable activity in India and the world
China’s import of milk powder growing
China’s import of milk powder is increasing at a tremendous speed. Import in the first half of the current year has already exceeded the imports of the whole year 2009. In 2009, imports amounted to 310000 tonnes. In 2010, imports increased by 55% to 480000 tonnes. As the world’s most populous nation, China’s demand for dairy products is naturally high. This year, China will consume 1.5 million tonnes of milk powder. This is half of total milk powder consumption. China is forced to import milk powder because its cattle reserve is fast depleting due to the hundred per cent non-vegetarian food habits of its people. But at the same time, Chinese do not use milk while preparing tea.
India , world’s top producer of milk
India is also in a similar position like China. India is the second most populous country in the world next to China. But Indians are not hundred per cent non-vegetarian and there is a respect for the cattle among Indians. Beef eating is not very popular in India and even many non-vegetarians avoid it. India has the world’s largest number of cattle and is world’s top producer of milk. Dairy farming is catching on in many parts of India as a profitable business activity. For example, in Dakshina Kannada region, milk cooperatives encourage better calf-rearing to produce more milk. Rural cattle fairs are held regularly. There is a scarcity of cattle in the Dakshina Kannada region. A cow, which was costing Rs.15000 last year, is costing Rs.25000 now. Better cattle-rearing practices are taught to the farmers to overcome this shortage and to increase productivity. Cattle feed price has increased by Rs.35-40 per kg whereas cost of milk has increased by only Rs.2 per kg.
High prices do not benefit farmers in USA
In USA, record prices are prevailing for dairy products. But dairy farmers in America are not benefited by this trend. This is because of the enormous increase in cattle feed cost. In fact, dairy income has dropped by 13% in America this year.
Milk price, a sensitive issue in India
Milk price is a sensitive issue in India. The price cannot be increased as per the whims of the producers. Consumers are very unhappy at the recent price hikes. In an election year, this becomes a political issue and no ruling party will risk it. This year, milk prices were raised three times by cooperatives like Amul and Mahanand Dairy. In New Zealand, milk price increase became a big political issue and the government was inquiring into allegations of market manipulation. In India also, several NGOs have become active and pressing for action by the government. The issue may be taken to the Competition Commission of India (CCI) and the ministry of consumer affairs. But consumers are highly disorganised and are not in a position to take up the issue coherently. This situation offers advantage to the milk producers to form cartels. In Gujarat, New Delhi and Maharashtra, milk prices have been increased three times in the current year – in February, April and July.
Per capita milk availability low in India
In Tamil Nadu, the cooperative dairy Aavin has decided to procure milk from the private sector to meet its demand. Private players are asked to part with 20% of the milk they procure from the farmers to Aavin. Private players are unwilling to supply to the government as they will not get a profitable deal for it. The reproductive capacity of Indian bulls is not considered high. In order to augment this, a new breed of super bull is custom-made in laboratory so that their progeny becomes milch cows of the highest quality. India’s breeding bulls are genetically upgraded by the National Dairy Development Board. 900 of the finest bulls will be created in about five years. In India, the per capita milk availability is 263 grams per day per person. It is still worse in China at 82. Denmark tops the list with a figure of 2400. USA has 748 and UK 587.
Dairy farming has a bright future in India
Dairy farming has a bright future in India. Indians use milk while preparing coffee and tea, unlike in other parts of the world. Children are encouraged to drink milk for health. Dairy products like buttermilk, curd, milk sweets, ghee, butter etc are very popular. But cheese is not as popular in India as in the Western countries. There are some companies in the field of dairy farming. Some companies, for example, are Kwality Dairies, Hatsun Agro, Heritage Foods, Vadilal Industries and Umang Dairies. In the month of July, Umang Dairies, promoted by J K Industries, gained over 60% in the stock markets and rewarded the investors. It manufactures premixes for tea and coffee vending machines. Kwality Dairy has a market capitalisation of over Rs.2000 crore.
Monsoon favours high milk production
Due to normal monsoon, milk production is expected to improve in the coming months. A normal monsoon ensures good production of milk because of increased availability of natural grass. This period is called ‘flush season’. The real money in dairy business is in liquid milk and not in other products. The entry of private corporate players has challenged the monopoly of the traditional milk cooperatives like Amul and Aavin. At present, raw buffalo milk containing 6.5% fat and 9% solids-not-fat (SNF) is made available to the dairies in North India at Rs.31 per litre. The density of milk is slightly more than water so that one litre of milk weighs 1.028 kg. Milk products like ghee, butter etc bring higher realisation but the cost of conversion including fuel cost is steep and reduce profitability.
India may have to import milk of proper measures are not taken
Despite the fact that India is the top milk producer in the world, if proper measures to increase milk supply are not taken, India may have to import milk for feeding the demand. If India enters the global market to import milk, then the international milk price will shoot up suddenly and will cost India a lot of foreign exchange. Since independence in 1947, India’s milk production has grown by more than six times. In recent times, milk production has grown at a CAGR of 4%. Currently India’s milk production stands at 112 million tonnes and is increasing by 3.5 million tonnes every year. But demand for milk in India is growing by 6 million tonnes a year. This demand-supply gap pushes the milk prices up, causing food inflation to soar. In 2010, the government allowed import of 30000 tonnes of milk powder to tide over the expected shortage. The government has banned export of milk powder to control prices. But milk producers are not worried about this ban as they can sell milk profitably in the domestic market itself. In the next three to five years, milk prices will rise periodically due to demand-supply gap.
Milk price will stay high
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