Covid-19: milk consumption down 25% in one month as restaurants remain closed
In a major setback for millions of farmers, India’s milk consumption fell by 25% over the past month due to the closure of hotels, restaurants and roadside tea stalls in part of a nationwide lockdown to prevent the spread of the coronavirus.
The drop in consumption resulted in a drop of 5 to 7 Rs per liter (or 25 percent) in the achievement of dairy farmers. The milk market is inundated with oversupply, with farmers in some areas selling in distress at a 50% discount. Distress sales take place in remote areas where private and cooperative dairies could not reach farmers for supplies due to disruption of transport services.
This scenario emerged after Covid-19 started to spread to major milk-producing states, such as Maharashtra, Gujarat, Karnataka, and Tamil Nadu.
As milk production continues, the drop in consumption could deter farmers from making further investments in the coming season, as the prices of milk derivatives like skimmed milk powder (SMP) have also collapsed. due to weak exports amid the global pandemic.
“Milk consumption has fallen by 25% over the past month due to the closure of hotels, restaurants and roadside tea stands. But domestic consumption has increased. The closure of ice cream parlors and other value-added products has contributed to the decline in milk consumption, ”said RS Sodhi, managing director of the Gujarat Cooperative Milk Marketing Federation (GCMMF), India’s largest dairy, which sells milk and its derivatives under the brand “Amul”.
On the other hand, household consumption of ghee, butter and milk has increased as most people are at home amid the ongoing lockdown across the country. However, the increase in household consumption is insufficient to compensate for the drop in overall milk consumption. Household consumption accounts for almost 25-30 percent of overall milk consumption in India.
Interestingly, dairies have not increased the prices of these milk derivatives despite a surge in their consumption.
“We sell our products at maximum retail price (MRP),” said Devendra Shah, president and CEO of Parag Milk Foods, the producer of the “Go” and “Govardhan” brand dairy products.
Meanwhile, declining overall consumption has prompted farmers to sell distressed milk, especially in remote areas of Maharashtra, Karnataka, Tamil Nadu and Gujarat. Some farmers offer milk to processors and private dairies at half the going price of 30 to 31 rupees per liter.
According to Sodhi, large cooperative dairies are required to pay farmers more because of their long-term links with farmers. The GCMMF pays Rs 31 per liter for cow’s milk and Rs 50 per liter for buffalo milk. Private cooperatives and small cooperatives, on the other hand, pay less in a situation of supply glut.
“This is a temporary phenomenon – just a few more weeks. With the onset of summer, which is almost a month away, the supply of milk will decrease and prices will pick up,” said Shah.
Normally, when the supply of milk is greater than consumer demand, dairies usually produce milk powder or milk powder. “But, SMP prices have collapsed due to reduced export opportunities. Shipments are halted and no orders are coming in. Despite the insufficient amount of SMP available in the market, it is not possible to converting excess milk into SMP and storing it for supply during peak demand season. Many dairies are facing a working capital problem due to lack of funding from banks, “Sodhi said.
SMP prices on domestic markets have fallen to Rs 230 per kg, from Rs 310 to Rs 320 per kg about a month ago. A similar trend is emerging in international markets, where SMP prices have fallen to $ 2,500 per tonne from $ 3,200 per tonne about a month ago.
Dairies, however, are hoping that lower milk purchase prices will undo the squeeze in their profit margins, which was feared after falling sales of many products like sour milk, buttermilk, lassi and ice cream. .