On Monday, Mother Dairy raised the prices of full-cream milk by Re 1 per litre and token milk by Rs 2 per litre in the Delhi-NCR. This is the fourth round of hike in milk prices this year by the company.
Earlier, in August, dairy giant Amul announced a price hike of Rs 2 per litre of milk. The hike in milk prices has made a dent in household budgets. Many have reduced the quantity or moved to cheaper options.
Milk and milk products are one of the most common food staples in Indian households. Almost every household consumes milk, butter, ghee and buttermilk. India is the largest producer of milk and milk products as well as the biggest consumer.
Consumers are feeling the pinch as they have to pay more for milk and milk products and they wonder what is driving up the prices.
Let’s look at the main reasons behind the rising prices of milk and milk products:
In August, torrential rainfall across the country caused crop damage and led to green fodder yields to decline. This was coupled with a steep rise in the cost of cattle feed. The ripple effect continues.
The cattle feeding cost alone has increased to approximately 20% compared to last year. Fodder prices in India are witnessing a nine-year high. Reports say the wholesale price index or WPI-based fodder inflation rate stood at 25.54 per cent in August 2022. The prices of milk and milk products are increased so that farmers do not have to bear the losses.
RISE IN PROCUREMENT COST
Due to the rise in input costs, milk procurement rates have increased by 15-25% compared to last year. On Monday, Mother Dairy attributed the hike in prices to an increase in its procurement cost of raw milk from dairy farmers.
HIGH ENERGY COST
There has been a huge rise in petrol and diesel prices, which has raised the cost of transportation of milk. This not just affects those who supply milk but also farmers who have to pay more on transporting fodder and milk.
MORE DEMAND, LESS SUPPLY
The demand for liquid milk has soared markedly this year. It is much more than it was in the pandemic era. Even as the demand grows, the supply hasn’t been able to keep up with the pace. The production of white butter and skimmed milk powder (SMP) continues to dip.
LUMPY SKIN DISEASE
Also, lumpy skin disease in Punjab, Gujarat, Rajasthan and Haryana – which are among the largest milk producers – has played a big role in causing a decline in milk yield. Because of the reduced milk yield, the prices are high.
Some dairy owners say that dairies across the country are reporting a shortfall of 8-10% in milk collection.
When the milk cost increased in August, Gujarat Cooperative Milk Marketing Federation (GCMMF) pointed out that the major reason behind the rise in prices of milk, was the sharp increase in costs of energy, packaging, logistics and cattle feed, which has led to an increase in the overall cost of operation and milk production.
Considering the rise in input costs, our member unions have also increased farmers’ prices in the range of 8-9 per cent over the previous year, GCMMF said.
