India’s export prospects, especially for skimmed milk powder (SMP), fat and butter, have been brightened by the recent increase in prices of dairy products on the global market.
Prices rose to year-high levels at the Global Dairy Trade (GDT) auctions, mainly driven by the post-Covid 19 demand push to unlock initiatives in many nations and the US dollar’s weakening.
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On Tuesday, GDT quarterly auction listed SMP prices at $3,243 per tonne, up 37% from $2,373 per tonne recorded about seven months back. When converted to Indian currency, prices in July were now at 235-236 per kg as compared to 173-174 per kg.
With increasing worldwide SMP prices, Indian firms should be able to export the surplus SMP inventory stock, according to a recent analyst forecast report by ICICI Securities on the milk market. This will decrease supply pressures in India and could lead to higher milk prices in the next 2-3 quarters.
Prices for domestic
According to the forecasts of the Indian Dairy Association (IDA), in the country there are around 200,000 tons of SMP storage with domestic prices floating at around ~ 220 per kg.
Industry insiders noticed that while the price gap is not appealing to SMP, exporting butter and fat is a profitable proposition. The GDT butter auctions were reported at $4,735 per tonne, which is approximately $346 per kg, whereas local butter prices hovering at around $299-300 per kg as in India.
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‘Prices in the SMP have not hardened much. But global butter prices are more than 40 per kg higher than the domestic price. That can affect domestic butter prices somewhat. There is also a chance of fat exports because the prices are attractive overseas,’ Hatsun Agro’s RG Chandramogan told, emphasizing the export potential for Indian dairy products. At the GDT auctions, prices of anhydrous milk fat, butter, SMP lactose and whole milk powder increased by between 2% and 17%.
Experts stated that China as well as the Middle East countries have started opening massive orders in the global market, which is believed to have induced price hardening.
Mr. R S Sodhi, Managing Director (MD) of the Gujarat Cooperative Milk Marketing Federation (GCMMF), stated that ‘local farmers will benefit greatly from higher global prices’.
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No affordable imports
There is no potential for affordable imports to India. We have demand in the global market for SMP, natural butter and butter oil. The price difference in butter and butter oils has been about ₹ 40 per kg of good export incentives, he stated, noting that the SMP rates at ₹ 230 – 240 would limit any potential decline in domestic SMP prices.