Over the last year dairy majors such as Amul, Mother Dairy, Godrej Jersey, Nandini Dairy and more have taken multiple price hikes for milk and milk products.
Rising raw milk procurement costs coupled with increasing transportation, processing and packaging costs are adding to dairy companies’ woes.
Sharing the key reasons for high milk prices, Sheetal Sharad, VP, ICRA Limited said that raw milk procurement prices, which started increasing in the second half of CY2021, have continued to increase in CY2022 given the substantially rising cattle feed and fodder costs for dairy farmers. Further, the incidence of Lumpy Skin Disease (LSD) in cattle temporarily constrained milk availability in key states, which kept raw milk prices high.
In addition, dairy companies have also been facing increasing transportation, processing and packaging costs, Sharad added.
Commenting on additional costs, Bhupendra Suri, CEO, of Godrej Jersey said that in all milk-based products, more than 70 per cent of the cost is raw milk cost leading to an overall increase in the price of these products. He added that other costs such as packaging, manufacturing variable, and logistics have grown by 11 per cent in the last one year, while glass bottle and pet prices have increased by 26 per cent and 6 per cent, respectively.
When asked about price hikes at Godrej Jersey, Suri said, “The price hike which we have taken varies across geographies. On an average, the price hike is in the range of 7 to 9%.” Commenting on price hikes taken by Parag Milk Foods, Shah shared, “In our core categories – Ghee and Cheese, we have taken price hike of 15% – 18%.”
Most recently, Mother Dairy took the fourth round of price hikes this year and increased the cost of full-cream milk by Rs 1 per litre and token milk by Rs 2 per litre in the Delhi-NCR market.
Last month, the Karnataka Milk Federation (KMF) which owns the milk brand ‘Nandini’ increased its milk and curd prices by Rs 2 per litre while Kerala Co-operative Milk Marketing Federation hiked its prices by Rs 6.
In October, Amul raised its full cream and buffalo milk by Rs 2 per litre in all states except Gujarat. Last month, RS Sodhi, MD, Gujarat Cooperative Milk Marketing Federation (GCMMF) said that the company has no plans in near future to increase milk prices.
Sharing an outlook on when to expect milk prices to come down, Sharad from ICRA said that a good quality monsoon resulting in better green fodder availability and cooling off of grains prices resulting in moderation in feed costs should result in lower cattle rearing costs for dairy farmers.
She further added that containment of lumpy skin disease and thus better raw milk yields should also help in higher milk production in the next calendar year.
“Overall, milk prices will be a function of the demand-supply situation then,” Sharad commented.
Suri from Godrej Jersey however noted that a rise in milk procurement prices is expected in the coming months. He said, “there is a steep margin compression due to aggressive increase in milk procurement, packing material and operating costs which the industry has not been able to pass on to the consumer.” Therefore, in the short to medium term, a further hike in consumer price in milk is expected, he said.
