“Unlocking Success: Your Guide to Dominating the Dairy Market in 2024”

I am sharing a part of the blog which I wrote last year on 31 March 2023. Please read it first.

Who is controlling the raw milk price in India?

The current dairy market situation in India is passing through an interesting phase. We asked 23 questions at the beginning of this year to forecast the dairy sector . One of the questions was to check if we would be requiring winter clothes on Holi in north India. We saw a drop in temperature during March and a surge in cough and cold cases validated the existence of cold-weather.

Unprecedented rains and hail storms damaged the Rabi crops and are still a big threat to unharvested wheat crops. The meteorological department was apprehensive about the loss of the Rabi crop due to the early onslaught of heat waves. The reality is just the reverse ; and there is more crop damage due to cold-weather and rains than the heat-wave .

This weather is supporting animal productivity and it is assumed that the delayed flush may get extended till late April. As per some of the experts the milk availability will remain sufficient to meet the market demand for fresh category of products. Rain and slightly cold weather has not yet helped the ice-cream and curd segment to gain sufficient traction as expected in this part of the year.

Surprise, Surprise, Surprise

This is not a time for huge ghee demand. Still the ghee prices have started to move up at this time. The bandwidth of ghee prices is from Rs 350 to Rs 650 per kg. The milk prices in India at Bulk supplier level is Rs 4-7 per liter lesser than that of our traditional VLC system. Paneer and cheese are available from Rs 180 to Rs 550 per kgs.

The market is flooded with all kinds of milks, Ghee and SMP. It is high time for the regulator to step in and take necessary steps. It is almost meaningless to mention about huge quantities of Paneer and khoa being sold which are made out of palm oil and plant based derivatives.

Nobody gave heed to our shouts last year

During the same time last year we were telling everyone that the stocks of SMP and ghee were enough and season was not favourable for summer specific products like ice cream, dahi, flavored milk and buttermilk , etc. We also got worried about the profitability of Indian dairy sector and shared a blog in July 2019 on “Dairy sector Show me the money”.. Read it here .. https://dairynews7x7.com/dairy-sector-show-me-the-money/

Finally we made our point around Diwali 2023 with the blog linked to dairy commodities status in India.. Read it here –  https://dairynews7x7.com/diwali-se-diwali-tak-where-did-the-dairy-commodities-money-go/

“2023 is now history, so let’s not dwell on it. Instead, let’s focus on the financial year starting today, April 1st, 2024.”

The beginning of this year is somewhat similar to the beginning of last year. The industry had lots of stock of SMP however butter was comparatively short and thus government was considering imports of Butter and AMF at that time. If the government had imported substantial quantities of butter back then, the returns today would have been monumental.  However, last year proved unfavorable for profiting from dairy commodity speculation. The prevailing prices of dairy commodities on April 1st 2023 were as follows : SMP at around 330/kg, Butter at 430/kg and Ghee at around 8300 per 15 Kg tin

The global prices of SMP were nearly identical to today’s, hovering around USD 2550. However, butter prices stood at least USD 2000 lower than the current level of USD 6500.

Everyone at that time was speculating higher prices of SMP and Ghee . Rains were doing their job, Milk availability remained consistent. This led to crash of commodities prices.

Today is the time to introspect and  shoulder the responsibility of huge unsold inventories as closing stocks. For this year I would suggest one should find answers to the following questions before taking a call to further build stocks of inventories or ficus on product/market diversification to make profits in FY 25.

a. Pay close attention to the weather forecast indicating a hot summer from March to May 2024. Avoid making immediate plans beyond that timeframe.

b. Monitor milk availability, which has not significantly decreased yet. Even a monthly reduction of 10% would be manageable as India continues to produce 8-10% more than the average.

c. Keep an eye on international butter markets, particularly any fluctuations in SMP prices. Focus on clearing old stocks of SmP first rather than accumulating new ones, despite bullish sentiments for July and August.

d. Note the decrease in weddings from April onwards, particularly in the South and to a lesser extent in the North, until July.

Please watch the next edition of our blog on April 16th in which we shall be showing you a possible  dairy scenario in Summer of 24.

I wish a great financial year full of promises, purpose and Profits for all of you.