Executives from major dairy companies say the supply crunch has intensified since late 2025. Raw milk prices are now at their highest level in five years, while climate change has shortened India’s traditional flush season through prolonged heat and erratic weather. At the same time, the cost of cattle feed has surged 35% to 40%, and packaging expenses have climbed because of polymer shortages linked to the conflict in West Asia.

The deeper challenge lies in the quality and structure of India’s milk production system. Only 30% to 35% of the country’s milk reaches the organised sector, leaving most production in the hands of small, unorganised farmers. Many cattle are fed low-cost raw materials rather than balanced compound feed, affecting animal health, fertility and milk quality. Although India produces roughly 240 million metric tonnes of milk annually, industry experts estimate the country needs 120 million tonnes of cattle feed each year, while current production capacity is only about 10 million tonnes.

Animal disease is adding further pressure to the dairy economy. Recurring outbreaks of lumpy skin disease have increased cattle mortality and reduced herd productivity, while many farmers lack insurance coverage for livestock losses. Combined with high production costs—estimated to be 10% to 15% above global averages—these problems are discouraging younger generations from remaining in dairy farming. Many are instead turning to horticulture, floriculture and other agricultural businesses that offer stronger returns.