One year ago, a litre of milk would set consumers back Rs 58. Right now, the same litre of milk costs Rs 66. What has changed in the last 12 months? Multiple factors have contributed to the rise in the price of milk across the country, including the prevalence of lumpy skin disease in cattle and farmers facing difficulty in procuring feed.

In a press conference, back in April, India’s Animal Husbandry and Dairy Secretary Rajesh Kumar Singh had said that the country’s milk production remained stagnant in the 2022-23 fiscal due to lumpy skin disease in cattle, while domestic demand grew by 8-10% in the same period because of a rebound in the post-pandemic demand. “The impact of lumpy skin disease on cattle can be felt to the extent that the total milk production is a little stagnant. Normally, milk production has been growing at 6% annually. However this year (2022-23), it will be either stagnant or grow at 1-2%,” Singh had said.

The rising milk inflation
India is the world’s largest producer of milk, with the country producing 221.1 million tonnes of it in the 2021-22 season. The second largest producer of milk, the USA, recorded just about half of that number, producing 102.5 million tonnes. But that production number is entirely dependent on the health of cattle, with farmers facing a double whammy of disease and scarcity of feed.

A jump in the cost of cereals has resulted in cattle feed becoming more expensive, another knock-on effect from the war in Ukraine. Cereal inflation was recorded at 15.27% for March 2023. In January 2022, fodder inflation was recorded at 7.14% and has been rising steadily since. Latest data from the Indian government puts wholesale fodder inflation at 24%,in February.

Cattle feed is usually made up of grains like maize or wheat, with additives like bran, protein meal and other minerals and vitamins, according to the National Dairy Development Board.

According to the Ministry of Statistics and Programme Implementation (MoSPI), in February this year, milk inflation was pegged at 9.65%, which was higher than provisional headline inflation for the same month, which stood at 6.44%“In the past few months, milk prices have risen by 14% to 15%, much more than inflation. But if you look at the past three years, it is less than 7%. 10 years ago full cream milk prices were at Rs 42. There has been a 52% increase,” RS Sodhi, president of the Indian Dairy Association and former managing director of Amul India had told TOI recently.The pandemic effect
During the pandemic and the ensuing lockdown across the country, the demand for milk dropped heavily, causing prices of products like milk, cheese and butter to crash. Reduced prices led to farmers to cut back on their livestock and also led to them underfeed their cattle, which in turn led to a drop in production now, just when demand has seen a resurgence.

“But this is a demand-supply situation because during COVID farmers suffered because of less demand. Last one year, the input prices, that is feed cost, increased by 20 to 25%,” Sodhi added.

The local market is also seeing a price increase from exports, with the subcontinent exporting dairy products worth about $391.59 million in the 2021-22 fiscal year compared to $321.96 million in the year before that.

When will the price stabilise?
In spite of all these factors contributing to rising dairy prices, Sodhi was optimistic about prices cooling post Diwali, which falls in November, when there is expected to be peak demand. “After Diwali, prices will stabilise, [they] may go down, but I don’t foresee a major decline,” Sodhi added.

The Indian government clarified in April that they would not be importing dairy products. Reports of possible imports had affected the market, prior to the clarification, with producers and farmers concerned about their effect on prices. “There were misleading reports regarding the possibility of import of certain dairy products by India, but the government hasn’t taken any decision on it. Because of this, there is some apprehension between dairy farmers and stakeholders,” a representative of the Animal Husbandry Department said recently.

In a further boost to the situation, major dairies in the country have slashed milk procurement prices by 10% at the end of May, which might not translate to a drop in retail prices but is expected to dissuade further increases in the price.