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Why do milk and milk products become expensive?

New Delhi: In the last one year, milk manufacturers like Amul, Mother Dairy, Godrej Jersey, Nandini Dairy and others have hiked the prices of milk and milk products several times.

The rising cost of raw milk procurement, along with the rising costs of transportation, processing and packaging, are adding to the problems of dairy companies.

Sharing the key reasons behind the high milk prices, Sheetal Sharad, Vice President, ICRA Limited, said raw milk procurement prices, which started to rise in the second half of 2021, continued to rise in 2022 on the back of significantly rising cattle feed costs and dairy feed. farmers. In addition, the incidence of lumpy skin disease (LSD) in cattle has temporarily limited milk availability in key countries, keeping raw milk prices high.

In addition, dairy companies also face rising costs of transportation, processing and packaging, Sharad added.

“Yes, this year there have been several price increases due to the consistent increase in raw milk prices. Milk prices have gone up by around 34-35% on an average,” said Akshali Shah, CEO, Parag Milk Foods.

On additional costs, Bhupendra Suri, CEO, Godrej Jersey, said that for all milk-based products, more than 70 per cent of the cost is the cost of raw milk, resulting in an overall increase in the prices of these products. He added that other costs, such as packaging, variable production and logistics, have risen by 11 per cent over the past year, while bottle and pet prices have increased by 26 per cent and 6 per cent respectively.

When asked about the price hikes in Godrej Jersey, Suri said, “The price hike we have achieved varies by geography. On an average, the hike is in the range of 7-9%.” Commenting on the price hike by Parag Milk Foods, Shah said, “In our core categories – ghee and cheese, we have accepted a price hike of 15%-18%.”

This is the fourth round of milk price hike this year by Mother Dairy, one of the leading milk suppliers in Delhi-NCR with volumes of over 30 lakh liters per day.

Recently, Mother Dairy implemented its fourth round of price hikes this year, increasing the cost of whole milk by Rs 1 per liter and token milk by Rs 2 per liter in the Delhi-NCR market. Last month, the Karnataka Milk Federation (KMF), which owns the ‘Nandini’ milk brand, hiked the prices of milk and curd by Rs 2 per litre, while the Kerala Co-operative Milk Marketing Federation hiked the prices by Rs 6.

The Gujarat Cooperative Milk Marketing Federation (GCMMF), which markets milk under the Amul brand, has no plans to raise milk prices in the near future, said its MD RS Sodhi.

In October, Amul hiked the price of full cream and buffalo milk by Rs 2 per liter in all states except Gujarat. Last month, RS Sodhi, MD, Gujarat Cooperative Milk Marketing Federation (GCMMF) said that the company has no plans to raise milk prices in the near future.

Sharing an outlook on when to expect milk prices to fall, ICRA’s Sharad said a good quality monsoon resulting in better availability of green fodder and a cooling in cereal prices leading to moderation in fodder costs should lead to lower cattle breeding costs for dairy farmers. .

She also added that curbing lumpy skin disease and thus better yields of raw milk should also help increase milk production in the next calendar year.

“Generally, milk prices will then depend on the supply and demand situation,” commented Sharad.

Suri from Godrej Jersey, however, warned that milk purchase prices are expected to rise in the coming months. He said that “due to aggressive increases in milk procurement, packaging material and operational costs, there was a steep decline in margins that the industry could not pass on to the consumer.” Therefore, in the short to medium term, further growth in living milk prices can be expected, he said.

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