India, the world’s largest dairy producer, is considering imports of milk products like butter and ghee due to a host of factors causing stagnant production and high prices of feed and cereals.
According to the animal husbandry and dairy department, milk output in India grew by 6.3% to 221 million tonnes in 2021-22, but production is expected to remain stagnant in 2022-23. This is due to several factors, such as the high cost of feed, inclement weather, a disease outbreak, and demand-supply mismatch.
Impact of the pandemic
One of the primary reasons for high milk prices is the impact of the pandemic on dairy production. Falling demand as social gatherings were postponed, and consumption demand from hotels and restaurants decreased led to farmers reducing herd sizes. So when demand improved after the easing of lockdown restrictions, supply fell short.
The dairy industry suffered another blow in 2022 due to an outbreak of lumpy skin disease, with an estimated death toll of 189,000.
The high cost of animal feed is another major factor contributing to high milk prices, with grains like corn and wheat being used for animal feed. Grain prices soared when Russia invaded Ukraine, causing animal feed prices to increase by more than 70% of dairy production costs. This led to an increase in retail prices as the dairy industry passed on higher production costs to consumers.
Climate change impacts
Rising temperatures also affect animal productivity, with dairy cattle giving less milk in summer and more in winter. However, there is almost no discussion on how to deal with the impact of rising temperature on milk yield.
Another long-term factor is low productivity, with cattle milk production in India being only 60% of that of China and less than a fifth of that of the United States.
Farmers in India are also replacing cows with buffaloes as it is not allowed to kill cows due to legal restrictions and religious beliefs. This means that farmers lose the life value of a spent animal, which would otherwise fetch them between ₹10,000 to ₹15,000 per animal. That money is usually reinvested in replenishing the herds.
High prices affecting food inflation
The high milk prices have also contributed to higher retail food inflation in India, with retail dairy prices being 9.7% higher year-on-year and cereal prices being 16.7% higher in February. The Indian government is considering importing milk products like butter and ghee after assessing the supply situation.