As skimmed milk powder (SMP) prices firm up in GlobalDairy Trade auctions mid-August, after five months of consecutive falls, it opens up opportunities for Indian exporters to look at international markets in the medium term.
India has hardly exported any SMP consignments this year owing to low prices in the global market, which, in turn, has also kept the domestic liquid milk prices in check. Firming up of prices in the international circuit could help reduce the 30,000 tonnes of SMP inventory lying in the country and eventually put pressure on retail milk prices here, feel players.
In the August 18 auction at GDT (Global Dairy Trade), which is an auction platform for internationally traded commodity dairy products, the prices of SMP have gone up by 8.5 per cent compared to the previous event, taking the average price to $1,521 per tonne. As such the GDT Price Index, a weighted average of percentage changes in prices, increased by 14.8 per cent in the August 18 auction, with the average selling price of $1,974 per tonne. Auctions for dairy products, including SMP, whole-milk powder (WMP), butter, butter milk powder, anhydrous milk fat, etc., are held twice a month.
R G Chandramogan, managing director of Tamil Nadu-based Hatsun Agro, a leading private dairy player in the region, felt that with this rise in international prices, the sentiments are likely to improve.
"While exports are not expected to pick up immediately, however, over the next two to three months, they are set to rise. Prices are around Rs 170 a kg now, and exporters would be very bullish once they cross the Rs 200-210 per kg mark," he said. Chandramogan added that Indian exports around 80,000 tonnes of SMP per year, and last year the country exported next to nothing.
Most of the SMP was re-converted to liquid milk, which helped with the supply situation in the domestic market.
With prices now on the rise, exporters would eye the international market. This coupled with the draught-like situation in Maharashtra, and the lean season setting in states such as Tamil Nadu, Karnataka and Maharashtra, affecting the availability of milk, is set to put pressure on domestic prices. As Chandramogan explained, "Milk procurement is already down 20 per cent in the cow belt, compared to the peak season."
R S Sodhi, managing director of the country's largest dairy cooperative Gujarat Cooperative Milk Marketing Federation (GCMMF), however, pointed out that it would take a while before the exporters are upbeat on international prices. "We are exporting to some of our international customers who insist for our products at around $3,400 per tonne. But, in terms of volumes, this is hardly more than a few hundred tonnes." He, however, highlighted that with winters (flush season for milk) approaching, this year might not see a lot of price increases in the domestic market. "The situation would be tough next summer," Sodhi said, adding growth in procurement is lower at 4-5 per cent this year in Gujarat, compared to a 14-15 per cent growth earlier. GCMMF procures 15 million litres per day across India.
GCMMF had exported around 20,000 tonnes of SMP in 2013-14, when the prices in the international circuit were high. It raised prices in June this year after a long hiatus of 13 months owing to increase in input costs. Unorganised milk players had raised prices in Mumbai city around April, followed by Mahanand and Kolhapur Zilla Sahakari Dudh Utpadak Sangh Ltd (which sells milk and milk products under the Gokul brand) raising prices in May on account of pressure from the retailer lobby.
India has hardly exported any SMP consignments this year owing to low prices in the global market, which, in turn, has also kept the domestic liquid milk prices in check. Firming up of prices in the international circuit could help reduce the 30,000 tonnes of SMP inventory lying in the country and eventually put pressure on retail milk prices here, feel players.
In the August 18 auction at GDT (Global Dairy Trade), which is an auction platform for internationally traded commodity dairy products, the prices of SMP have gone up by 8.5 per cent compared to the previous event, taking the average price to $1,521 per tonne. As such the GDT Price Index, a weighted average of percentage changes in prices, increased by 14.8 per cent in the August 18 auction, with the average selling price of $1,974 per tonne. Auctions for dairy products, including SMP, whole-milk powder (WMP), butter, butter milk powder, anhydrous milk fat, etc., are held twice a month.
R G Chandramogan, managing director of Tamil Nadu-based Hatsun Agro, a leading private dairy player in the region, felt that with this rise in international prices, the sentiments are likely to improve.
"While exports are not expected to pick up immediately, however, over the next two to three months, they are set to rise. Prices are around Rs 170 a kg now, and exporters would be very bullish once they cross the Rs 200-210 per kg mark," he said. Chandramogan added that Indian exports around 80,000 tonnes of SMP per year, and last year the country exported next to nothing.
Most of the SMP was re-converted to liquid milk, which helped with the supply situation in the domestic market.
With prices now on the rise, exporters would eye the international market. This coupled with the draught-like situation in Maharashtra, and the lean season setting in states such as Tamil Nadu, Karnataka and Maharashtra, affecting the availability of milk, is set to put pressure on domestic prices. As Chandramogan explained, "Milk procurement is already down 20 per cent in the cow belt, compared to the peak season."
R S Sodhi, managing director of the country's largest dairy cooperative Gujarat Cooperative Milk Marketing Federation (GCMMF), however, pointed out that it would take a while before the exporters are upbeat on international prices. "We are exporting to some of our international customers who insist for our products at around $3,400 per tonne. But, in terms of volumes, this is hardly more than a few hundred tonnes." He, however, highlighted that with winters (flush season for milk) approaching, this year might not see a lot of price increases in the domestic market. "The situation would be tough next summer," Sodhi said, adding growth in procurement is lower at 4-5 per cent this year in Gujarat, compared to a 14-15 per cent growth earlier. GCMMF procures 15 million litres per day across India.
GCMMF had exported around 20,000 tonnes of SMP in 2013-14, when the prices in the international circuit were high. It raised prices in June this year after a long hiatus of 13 months owing to increase in input costs. Unorganised milk players had raised prices in Mumbai city around April, followed by Mahanand and Kolhapur Zilla Sahakari Dudh Utpadak Sangh Ltd (which sells milk and milk products under the Gokul brand) raising prices in May on account of pressure from the retailer lobby.
Resource:http://www.business-standard.com/article/markets/skimmed-milk-prices-firm-up-in-international-market-115082200581_1.html
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