The retail prices of milk in India have been on an upward trajectory and they are expected to go up by an additional 4%-5% year-on-year in FY24. Factors such as supply disruptions, increased production costs, and changing weather patterns have contributed to this rise. Let’s delve into the key drivers of the recent milk price surge, its potential impact, and what the future holds for consumers.

Feed & Fodder Prices Surge Amid Monsoon Deluge

The recent monsoon deluge in certain northern states has severely impacted standing crops, leading to a shortage of key ingredients like de-oiled rice bran and maize, which are crucial components of livestock feed.

Monsoon plays a vital role in determining the feed and fodder prices, which, in turn, affect milk prices. The heavy rainfall has increased moisture content in crops, posing a risk of fungal infections and damage. As a result, the prices of these essential feed ingredients have surged by up to 20% in a short period. Feed and fodder prices have put pressure on milk production costs, ultimately impacting retail milk prices.

Weather’s Wrath

The vagaries of weather, especially the monsoon, impacted milk production and prices. The aftermath of the rain deluge further adds to the complexity, disrupting crop calendars and forcing a shift to short-term crops. Insufficient rainfall and crop arrivals delays may lead to feed and fodder supply crunch. This shortage could further impact milk production costs, causing retail milk prices to rise by an estimated Rs 2-4 per litre.

Retail Milk Price Trend

Over the past three years, milk retail prices have surged by almost 22%, with a 10% increase in the last year alone. This continuous upward trend has been driven by various factors, including rising production costs, higher demand, and supply challenges. The expected increase in FY24 will add to the burden on consumers. While industry experts anticipate an inevitable increase in milk prices, concerns are emerging about the impact on consumer demand. Some experts argue that milk prices may stabilize due to seasonality, but a delicate balance must be maintained to avoid disrupting consumer purchasing patterns. The recent history of consistent milk price hikes raises questions about the sustainability of these increases.

Hope For Relief After Monsoon

Union Minister has suggested that milk prices may stabilize and even come down after the monsoon. He cites an anticipated decline in green fodder prices as a reason for potential relief for consumers. However, the situation remains uncertain, and various factors will influence the outcome.

OFB’s Insight

The confluence of factors, including supply disruptions, increased production costs, and weather-related challenges, has driven retail milk prices to unprecedented levels. While the near future might witness further price hikes due to supply constraints, there is a glimmer of hope on the horizon as the post-monsoon period could bring relief.

The delicate balance between maintaining dairy farmers’ livelihoods and ensuring affordable milk for consumers remains a pressing concern, underscoring the need for sustainable strategies in the dairy industry.