Dynamics and Dilemmas: The Evolving Narrative of Indian Dairy Exports
Indian Dairy Association (IDA) celebrates National Milk Day on 26th November 2023. This event is celebrated in India to commemorate the birth anniversary of Dr. Verghese Kurien, hailed as the "Father of the White Revolution".
Dr. Verghese Kurien (1921-2012), was a visionary who revolutionized the country's dairy industry. Serving as the architect of Operation Flood, the world's largest dairy development program, he transformed India into the globe's leading milk producer. Dr. Kurien's leadership was pivotal in establishing the Gujarat Cooperative Milk Marketing Federation (GCMMF) and the iconic brand Amul, symbolizing India's dairy success. His cooperative model empowered millions of small farmers, particularly women, by organizing them into cooperatives, ensuring fair prices and streamlined supply chains.
As the chairman of the National Dairy Development Board (NDDB) from 1965 to 1998, Dr. Kurien implemented innovative technologies, making significant contributions to milk processing and transportation. He played a key role in the founding of the Institute of Rural Management Anand (IRMA) and received numerous accolades, including the Ramon Magsaysay Award and the Padma Vibhushan. Dr. Verghese Kurien's legacy extends beyond India, influencing cooperative movements globally and leaving an enduring impact on rural development and the dairy sector. His dedication to empower farmers and ensure food security continues to inspire agricultural leaders worldwide.
On National Milk Day, IDA, through its 4 zones and 12 chapters, organizes various events and activities like Paying tribute to Dr. Kurien, Awareness Campaigns, Seminars and Workshops in collaboration with Educational Institutions and many others, to honour Dr. Kurien's contributions and to highlight the importance of milk and the dairy sector in the country.
National Milk Day serves as a reminder of the transformative impact of the White Revolution on India's dairy industry and aims to inspire continued growth and innovation in the sector. The IDA's celebrations play a crucial role in fostering awareness and appreciation for the dairy sector's vital contributions to the nation's health and economy.
The Global Dairy Trade (GDT) price index experienced a marginal decline of 0.7% during the latest trading event on November 7, 2023. This marks the first decrease since August 15, 2023, following four consecutive increases in the GDT price index. While this event reflects a modest downturn, current market indicators suggest that a recovery may be on the horizon in the coming weeks.
Global milk supplies saw a year-on-year decline of 0.3% in August. Despite a rebound in the months of September and October, prices have not yet reached the peak levels observed in March 2022. Generally, prices are hovering around pre-COVID levels, with the exception of butter, which continues to maintain a higher position.
China remains a significant player in the powder markets, with continued buying activities. Recent reports also indicate buying activities from other regions, including North Asia and Southeast Asia. A Rabobank report highlights an anticipated import deficit of 11.9 million metric tonnes of liquid milk equivalent (LME) in China for the year 2023. This deficit is expected to grow over the next decade, driven by an anticipated increase in demand in China outpacing domestic supply
The global market outlook appears optimistic, with expectations of increased purchases from China and heightened demand up to the Christmas holidays. Considering the current trend of lower supplies on the global front and a surge in demand, the likelihood of prices returning to the positive momentum observed in the previous two months is high. This positive development would alleviate margin pressures on producers, as farmgate milk prices are closely tied to wholesale commodity prices. Barring any unforeseen shocks, the market seems poised for a more favourable pricing environment in the near future.
The Indian dairy industry is poised to enter the flush season with a noteworthy surplus of dairy commodities. In the last one year, spanning from November 2022 to 2023, the industry has undergone a series of fluctuations. Despite this, the current trend indicates a positive trajectory marked by consistent milk availability. However, a unique set of challenges emerged during the summer of 2023, where the utilization of dairy commodities plummeted to unprecedented lows. This decline was primarily attributed to diminished demand, a consequence of unseasonal rains.
As the industry prepares for the upcoming flush season, there is a notable accumulation of Skimmed Milk Powder (SMP) and Butter, reminiscent of the levels observed in 2020. The heightened anticipation for the flush season is met with an increased level of milk production, particularly evident in some large cooperatives that have reported double-digit growth. This surge in production has, however, sparked concerns regarding the potential inundation of milk during the peak flush season, anticipated in January or February.
Several states, including Rajasthan, Bihar, and Gujarat, have achieved record levels of milk procurement, indicating the robustness of the dairy sector. India is currently sitting on a substantial stockpile of SMP and Butterfat.
Despite the positive aspects of increased production and surplus stocks, the short-term scenario witnesses a downtrend in procurement prices. This is particularly evident in Maharashtra, where the procurement price of milk with 3.5% fat and 8.5% SNF (solid not fat) has experienced a significant decline.
These market dynamics underscore the intricate balance that the Indian dairy industry navigates, experiencing both the benefits of heightened production and the challenges posed by fluctuations in demand and pricing. The upcoming flush season will be a crucial period for stakeholders to manage the surplus effectively and address the implications on procurement prices, ensuring the sustainability and resilience of the Indian dairy sector.
The imperative need to prioritize and emphasize dairy product exports from India has been a recurring theme in our discussions. Notably, the IDA recently took a proactive step by organizing a Webinar focused on "International Trade Opportunities for the Indian Dairy Industry." The Webinar brought together industry experts, administrators, and exporters to share insights and engage in discussions on strategies to enhance the export of dairy products from India.
The discussions during the webinar highlighted the existing gap between demand and supply, underscoring the pivotal role that export opportunities play in ensuring favourable prices for milk farmers. While domestic prices are currently competitive for the export of butter and ghee, challenges arise in the case of Skimmed Milk Powder (SMP), where a significant disparity between international and domestic prices poses obstacles to successful export endeavours.
The webinar served as a platform for stakeholders to explore and deliberate on various measures that could be adopted to address the challenges associated with dairy product exports. Insights from industry experts, administrative authorities, and experienced exporters contributed to a comprehensive understanding of the intricacies involved in expanding the international footprint of Indian dairy products.
As the discussions progress, it becomes evident that a tailored approach is necessary, considering the diverse range of dairy products. While butter and ghee find favourable conditions for export due to competitive domestic prices, the hurdles faced by SMP exports necessitate a nuanced strategy. Bridging the gap between international and domestic prices for SMP requires collaborative efforts from industry stakeholders, policymakers, and exporters.
Webinar on international trade opportunities concluded with a note to take a proactive step toward addressing the challenges hindering the expansion of dairy product exports from India. By fostering collaboration, sharing expertise, and developing targeted strategies, the Indian dairy industry can unlock its full potential on the global stage, benefiting both producers and consumers in the process. As this issue gains prioritization, the industry is better positioned to overcome hurdles and capitalize on the immense opportunities present at the international market.