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
Chief Thinking Officer
Suruchi Consultants (ISO 9001:2008 Company)