Thursday, March 16, 2017

Who knows the actual price of milk in India ? Please try to answer (33rd DP) (1-15 march)

Dear friends,
At the outset I would like to wish you a very happy and colorful Holi. Though it's a little bit late but I am sending your favorite dairy pulse one day before to ensure that yesterday's color have not faded completely :)
This fortnight was full of news related to increase in milk prices anywhere from 2-3/liter for consumers by the national brands. This created a lot of questions in my mind and certainly in minds of everyone involved.
a. Is this price increase actually supporting farmers to meet high cost of production due to inflation in input costs and drought in certain areas?or
b.Is this price increase actually supporting the dairy processors to maintain their ever growing bottom line in liquid milk segment in particular?or
c. Is this price increase actually happening under the pressure of farmer groups or unions who are just not ready to accept lower milk prices as being paid by the cooperatives and private sector in certain states ? or
d. Is this price increase actually  aligned with the simple demand supply equation of economics ?
While I attempted to understand the truth behind this price increase, I got confronted with the question on "Who knows the actual price of raw milk in India ?" Let us look at various stakeholders on whether they have the answer or not :
1. The farmer : No, as he has imputed cost model in farming and he ignores or neglects so many costs involved like labour, roughage from his farm, etc.
2. Dairy processor : No , as there is hardly any dairy processor in India ( except a few medium to large Integrated commercial dairy farms) as most of them do not have any backward integration and they are just following the old pattern of maintaining raw milk price on the basis of trend projections in short term rather than comprehensive cost studies and modelling or scenario planning.
3. Consumer : No, as she is still believing that Safe and pure milk is not available to her at any price .
4. Research Institutions : No , as they have only localised research paper available on milk cost structure with 20-30 farms and do not have a pan India clarity on 75 million farmers.
5. Government : No , as Government has no time understanding the raw milk cost structure otherwise they would have come out with msp( minimum support price) for milk ( I  also doubt whether they are sure of farmer's profitability on the agro commodities where msp is applicable).
So who knows the actual price of milk ? If anyone from the dairy fraternity could help me out then please share. However this year onwards our target is to look into various models to understand the critical success factors ( objectively evaluated and not subjective ratings) for sustainability of dairy farms at various levels of operations.
Awaiting comments, suggestions and insights from fellow members of this fraternity which is ever growing.
Happy e reading
with best regards
Kuldeep Sharma
Chief Thinking Officer
Suruchi Consultants (ISO 9001:2008 Company)
C-49 Sector-65
Noida 201307

Wednesday, March 1, 2017

Will India meet the target of 163.74 Mln Ton of milk production in 2016-17 ? (32nd DP 16 to 28 Feb, 2017)

Dear Friends,

Last fortnight  was full of news related to pressure on large dairy/food companies to hike prices, clouds of drought over the dairy industry, Demand of farmers groups to fix MSP for milk also , FSSAI building a strong regulatory foundation for fortification and organic labeling ,Indian companies looking at gulf market and Tata funds eyeing 23 % stake in Dodla dairies, etc.

With a lot of news coming on possible drought in milk production from western and southern regions and stocks of SMP getting depleted in winter only for reconstitution by the large dairies, the question of the hour is whether India would be able to meet its targeted production of milk of 163.74 Mln ton in 206-17. The results till October 2016 have shown satisfactory growth but the results of November to March are still awaited. Let us see the effect of combination of economic factors like Frozen wallet (demonetisation) and environmental factors like global warming bring for Indian dairy industry this time.

However the following news has taken me by surprise and I would like to focus on it as a news of the fortnight :

News of the fortnight :Edible oil surpassed packaged dairy market this year 

This news though looks so simple but needs to be looked from long term perspective. A few years back when FAIDA report ( Mckinsey-CII) was published on packaged food industry then packaged milk was a star with large market size in high growth market . Edible oil market size was huge but growth rate was low. Now Edible oil topping the list in packaged food and overtaking the complete dairy segment ,is clearly a signal for the consumer trend towards alternate sources of cost effective nutritional staple food.Desi ghee or dairy based edible oil in packaged form is hardly 5 % of the total edible market in organized sector. 

Does it mean that some other dark horses are also trying to take over some other dairy categories ( e.g Coconut water /Fruit flavored beverages against fermented milk products, imitation cheeses against dairy based cheese spreads, Juices/nectars against milk, margarine/vegetable oil based products against butter, Frozen desserts against Ice creams (already happened). This way I also see that non dairy whiteners may also come from now where to take on two segments of dairy whiteners in powder as well as tea special milk varieties ( mainly double toned milk) . Such non dairy whiteners in beverage forms are already available in our neighboring country in tetra pack and are quiet popular. 

I leave all of you with these food for thoughts for the next fortnight.

It is a great time of dairy events with IDA event at Mumbai which got over on 18th, Gulfood which is going on at Dubai currently and Aahar 2017 from March 7th to 10th.

So you may plan your this week and next week  accordingly for learning and networking.

Happy e reading

Kuldeep Sharma
Chief Thinking Officer
Suruchi Consultants (ISO 9001:2008 Company)
C-49 Sector-65
Noida 201307