Skimmed milk powder (SMP) prices, which grew by 12.1 per cent in GlobalDairyTrade (GDT) auctions last week, touching $1,867 per tonne, showed signs of recovery after a long period of dull prices owing to flush supplies. Indian industry players who are keeping a close watch on the situation as exports have become unviable from India owing to high domestic prices, feel that international prices are expected to improve from here on, which might open export opportunities in the medium-term.
Some like R G Chandramogan, managing director of Hatsun Agro, a Tamil Nadu-based private dairy player felt that the prices would continue to rise hereafter and hence post three to four months, the international prices would support exports from India. While others like R S Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation (GCMMF) are more cautious and feel that while this is definitely a sign of recovery, one has to keep a close watch on domestic SMP prices as well.
In the June 1 auction at GDT, which is an auction platform for internationally traded commodity dairy products, the prices of SMP have gone up by 12.1 per cent to $1,867 per tonne. Prices from New Zealand were around $1,745-2,155 per tonne range, while prices from EU participants were at $1,855-1,910 per tonne range. Indian and US dairies did not participate in the auction. The reason behind the rise is increasing demand from China, and production drop in Australia and New Zealand where low procurement prices have made dairying unviable for farmers.
Milk production in Australia this year is expected to be to 9.55 billion litres, two per cent less than in 2014-15, and way down from the 2000 peak of nearly 11 billion litres. China is a major importer of SMP, accounting for nearly 30 per cent of the total exports from Australia and New Zealand.
Currently, Indian SMP prices are ruling at Rs 165 -180 per kg for good quality powder, and as Sodhi said that the 12.1 per cent increase in GDT auction prices means that the landed cost of SMP in India would go up by Rs 20 per kg.
He also added that prices of fat have started going up in the domestic market, and lower prices have induced more consumption of SMP off late. «As such prices in the domestic market would also go up,» he felt. Therefore, it would be a wait-and-watch situation for exporters who would keep a close watch on international prices before they start exports.
Auctions for dairy products including SMP, whole-milk powder (WMP), butter, butter milk powder, anhydrous milk fat etc are held twice a month.
India exports around 80,000 tonnes to 1 lakh tonne of SMP every year after meeting its domestic requirements. Last fiscal it exported next to nothing and the excess inventory helped keep consumer prices of milk in check for a long period. GCMMF (owner of Amul brand) announced a rise in milk prices from June 3 in Delhi, to be followed subsequently across the country.
GCMMF had exported around 20,000 tonnes of SMP in 2013-14 when the prices in the international circuit were high.
Analysts, however, caution that one has to keep a close watch on how the supply picks up during monsoons, which might again push prices under pressure.
Source