Monday, October 15, 2018
 Milk Powder Exports May Pick Up On Rise On Global Prices  

As global dairy prices see an uptick (nearly 17 percent) in the past four weeks or so after hovering at historically low levels for much of 2016, Indian exporters feel exports of skimmed milk powder (SMP) might become viable in the short term.


Currently, Indian domestic prices of SMP is about 20 percent more than the international prices of around Rs 155-160 a kg, exporters feel India is not competitive to export SMP. Major players such as the Gujarat Cooperative Milk Marketing Federation (GCMMF) that had exported around 20,000 tons of SMP in 2013-14 when prices in the international circuit were high said international prices are likely to firm up further in about a month or so.


R S Sodhi, managing director, GCMMF, which markets dairy products under the Amul brand, said: “Exports are not yet viable, as current international SMP prices do not support exports. SMP prices have risen six-seven percent in the past one month or so. India will be competitive in exporting SMP with a further increase of four-five percent in the international prices. This is expected to happen in around a month or so, and after that, exports would be viable.”


The reason Sodhi is upbeat about SMP prices moving up in the international markets is that globally, SMP and Whole Milk Powder (WMP) prices remain in tandem traditionally. “But, now WMP prices are around $600 a kg or about 30 percent more than SMP prices. Naturally, SMP prices would increase,” he said.


Another leading dairy products exporter Parag Milk Foods, too, had cut down on its SMP production, as the exports were not viable and focused on other dairy products such as cheese. Devendra Shah, chairman and managing director of Parag feels SMP exports is not viable at the current prices. “Rs 155-160 a kg is the current domestic prices of SMP, and the global prices are 20-25 percent lesser than domestic prices. If prices move up by another five-six percent in the international market, then exports would be viable,” he said.


The European Union (EU) still holds a lot of stock of SMP, which is why the prices are still at this level. However, in the next fortnight or so, prices will definitely increase, feels Sodhi. “Already production is down in the EU because of low commodity prices. Side by side, New Zealand and Australia production has also decreased while the consumption as such has grown,” he said.


International media reports suggest after rising nearly three-fold from 2009 to 2014, milk prices halved earlier this year, as farmers increased dairy supplies to try to cash in on an expected surge in demand from China and West Asia. The situation got more critical after Russia banned imports of food from the US, Australia, Canada and EU in August 2014, which led to piling up of a surplus.


Experts, however, say that surplus is waning. One of the world’s largest dairy exporter New Zealand saw production falling by 1.6 percent in the year to May 31. Production in Australia, too, has fallen about two percent till June.


Sodhi said in FY16, SMP exports was about Rs 300 crore. It used to be around Rs 3,500 crore some time ago.


Amul has exported to Bangladesh, Pakistan, Afghanistan, West Asia, but in very low quantities. Amul exported about Rs 240 crore worth dairy products in FY16, and around half of this was commodity. Sodhi said it could have been three to four times more, if the market had been favorable.


Even if exports of SMP start, it would have no immediate impact on the prices of liquid milk in India, as liquid milk prices are already more than SMP prices in India, say players.

Source: Business-Standard

Posted on Thursday, August 25, 2016 (Archive on Thursday, September 01, 2016)
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