SMP prices fall as industry sees demand for dairy products drop amid Covid lockdown

The ongoing lockdown due to the increase in the number of Covid-19 cases and the resulting drop in demand is once again affecting the dairy industry. The sector, which had been performing well until about a month ago, is now worried about the negative impact if the foreclosure continues for longer.

While shops, restaurants and hotels remain closed, the sale of staples such as butter, cheese and paneer has plummeted. The sale of liquid milk has also been affected due to the closure of tea shops and candy shops. Even soaring temperatures have not resulted in increased sales of ice cream, which is a source of money for dairies in the summer.

RS Sodhi, managing director of the Gujarat Cooperative Milk Marketing Federation – the cooperative giant that markets milk and dairy products under the Amul brand – said the sale of ice cream is almost a third of what it was during the same period in 2019. “Of course, we cannot compare the 2020 sale because the nationwide foreclosure had already started at the time. But ice cream sales have been hit, ”he said.

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Items like cheese, butter, paneer and skimmed milk powder (SMP), which make up the bulk of what the industry calls the HORECA (Hotel Restaurant and Catering) sector, recorded the lowest sales .

The direct result of this fall in demand was a collapse in commodity prices. Sodhi said weak demand for SMP caused the prices, which ranged between Rs 260 and Rs.265 per kg, to match current rates of Rs 225 to Rs 230 per kg. Other dairies have reported prices falling to Rs 215-220 per kg. This correction in domestic markets comes even as international SMP prices remain robust. The April 20 auction on the global online platform Global Dairy Trade, owned by New Zealand cooperative dairy giant Fonterra, saw a slight correction of $ 3,365 / tonne from the previous high of $ 3,367 / tonne April 6. These are the highest prices the platform has seen in the past five years.

As falling demand continues to weigh on the sector, some dairies blame psychosis on fear of distress sales. Dasarth Mane, president and CEO of Indapur-based Sonai Dairy, said small dairies, which are in dire financial straits, are selling their stock of SMP to raise funds. “This must be stopped, otherwise the commodity market will collapse and farmers’ prices will fall again,” he said.

Currently India has around 1.15 lakh tonnes of skimmed milk powder and around 30,000 tonnes of white butter stocks.

Since the lockdown began, dairies have started cutting their purchase prices to make ends meet. Farmers, who were previously paid around Rs 30 per liter for milk with 3.5 percent fat and 8.5 SNF (solid non-fat), now get around Rs 25 to 27 per liter. While Mane has said prices will not drop below Rs 25, other dairies are unsure how long demand levels will stay low.

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