Why Are Milk Prices Rising?

Consumers across India are feeling the pinch at the grocery store as milk prices rise again. Major milk companies like Amul and Mother Dairy announced a ₹2 per litre increase in milk prices starting June 3, 2024.

On Sunday, the Gujarat Cooperative Milk Marketing Federation (GCMMF), known for its Amul brand, announced a nationwide increase in milk prices of about ₹2 per litre starting Monday. The ₹2 per litre hike translates to a 3-4% increase in MRP, which is significantly lower than the average food inflation. With the revision, Amul buffalo milk will cost ₹73 a litre and cow milk ₹58 a litre.

GCMMF emphasised that it hasn’t raised the prices of fresh pouch milk in major markets since February 2023. As part of its policy, Amul ensures that nearly 80 paise of every rupee consumers pay for milk and milk products go to milk producers.

Following Amul’s news, Mother Dairy also announced the milk price hike. In Delhi-NCR, Mother Dairy’s full cream milk is now priced at ₹68 per litre, with toned and double-toned milk at ₹56 and ₹50 per litre, respectively. Buffalo and cow milk are now priced at ₹72 and ₹58 per litre. Token milk (bulk vended milk) will be sold at ₹54 per litre. Mother Dairy, which currently sells 35 lakh litres of fresh milk per day in Delhi-NCR, last changed its liquid milk prices in February 2023.

Why Are Milk Prices Increasing?

1. Rising Production Cost

Milk suppliers pointed out that rising production costs were the main reason for the repeated hikes. Mother Dairy stated that the price hike was primarily to compensate the producers for increased production costs, which have been on the rise for over a year.

Amul stated, “This price hike is being done due to an increase in the overall cost of operation and production of milk. Our member unions have also increased farmer’s prices approximately by 6-8% over the last one year.”

Rising costs of cattle feed, transportation, storage, and labour, along with recent outbreaks of diseases and heatwaves, are pushing up milk production costs in India, leading to higher prices for consumers.

In 2022 alone, Mother Dairy increased prices by ₹10 per litre, while Amul saw multiple revisions. However, back then, it was due to the lumpy skin disease, as per India’s Animal Husbandry and Dairy Secretary Rajesh Kumar Singh and Parshottam Rupala, Union Minister for Fisheries, Animal Husbandry and Dairying. Parshottam Rupala stated the annual growth rate of milk production in the country came down to 3.83% in 2022-23 from 5.77% in 2021-22.

2. Heatwave Threat

The situation is further complicated by the current heatwave scorching parts of India. Mother Dairy, based in Noida, warns that these extreme weather conditions could further impact milk production. Heat stress in cattle and buffaloes, caused by rising temperatures and humidity, adversely affects their health, well-being, and milk production.

The Lancet report predicts that India’s increasing temperatures could potentially reduce milk production by 25% by 2085. As India is the largest producer and consumer of milk globally, such production losses pose a significant threat to the livelihoods and nutrition of millions, particularly the 89 million smallholder dairy farmers who contribute 85% of the total milk production.

In the northern plains of India, which account for 30% of the country’s milk production, the Temperature-Humidity Index (THI) often exceeds 80 during summer. Heat stress affects dairy cattle for more than half the year (April to October), with little relief as temperatures remain high even at night. If these conditions persist, heat stress-induced production losses in the northern plains could amount to approximately 3.4 lakh tons of milk by 2030. This would result in dairy farmers losing around 15,000 crores due to reduced milk production and heat-related health issues.

India, the world’s largest milk producer, is facing rising costs and environmental challenges that threaten the affordability of this essential food item for millions.

Now let us look at a few diary stocks:

Note: The data is as of June 5, 2024.

1. Nestle India Ltd – Nestle India Limited, which is involved in the food business, offers various milk products, such as ghee, condensed milk, and more. The company’s 5-yr CAGR is 16.79%.
2. Hatsun Agro Product Ltd – The company is involved in the manufacturing and marketing of products that cater to both cooking and consumption, such as milk, ice creams, curd, etc. The company’s 5-yr CAGR is 13.64%.
3. Parag Milk Foods Ltd – Parag Milk Foods offers various dairy products such as milk, ghee, paneer, etc., under their brands Gowardhan, Go, etc. The company’s 5-yr CAGR is -6.09%.
4. Dodla Dairy Ltd – Dodla Dairy Ltd offers various dairy products, such as milk, ghee, curd, sweets, etc. The company’s 1-yr returns are 55.76%.
5. Modern Dairies Ltd – The company manufactures a wide range of milk and milk products. The well-known diary brand Mother Diary is one of their clients. The company’s 5-yr CAGR is 64.89%.

Measures From the Government 

Recognising the challenge posed by heat stress-induced production losses, the Government of India initiated programs in 2017 to identify traits for heat tolerance and develop climate-resilient dairy practices. The National Bureau of Animal Genetic Resources (NBAGR) has identified three major heat tolerance traits in cattle: heat shock proteins, coat colour, and woolly hair.

Meanwhile, the Kerala Co-operative Milk Marketing Federation (KCMMF), known for its brand Milma, announced on June 1, 2024, its initiative to fortify the state’s cooperative dairy sector and achieve self-sufficiency in milk production, aligning with the state government’s vision.

In an article celebrating World Milk Day, Milma Chairman KS Mani highlighted the focus on enhancing productivity and supporting dairy farmers grappling with rising input costs. He highlighted the state government’s implementation of various projects aimed at bolstering milk production to meet domestic demand, underscoring the pivotal role of three-tier local self-government institutions in executing these initiatives while prioritising farmers’ welfare.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.