Producer versus Consumer: When cash returns to cows

Maharashtra Dairy farmers
Baramati/Indapur (Maharashtra) – Amarsinh Kadam isn’t sure how long Sonai Dairy at Indapur will continue paying the Rs 29-per-liter rate for the 250-odd liters of milk that it buys daily from him. This farmer from Sansar village in Indapur taluka of Pune district feels that the government at the Centre will soon “act” to bring down the prices or, at least, stop them from rising further.

”Last December, I was getting only Rs 22 per liter (for milk with 3.5% fat and 8.5% solids-not-fat content). They started procuring at Rs 25 only from April and raised it to Rs 29 per liter from December 1,” informs Kadam, who has 40 Holstein Friesian crossbred cows, of which around 25 produce milk at any given point.

The 30-year-old  who cultivates fodder maize, jowar (sorghum) and napier grass on five out of his 10-acre holding incur a monthly expenditure of around Rs 1.50 lakh on his 40 animals, which includes the cost of feed, veterinary medicines, labor, electricity charges, etc. At Rs 29/litre, his monthly revenue from 250 liters is just over Rs 2.15 lakh. That, net of expenses, translates into a monthly income of Rs 65,000.

”You can work out how much I earned when my milk was selling at Rs 22 per liter. It was hardly Rs 15,000. Don’t I deserve to be paid at least the current rate?” asks Kadam, who also grows sugarcane on 2.5 acres and seasonal vegetables such as cauliflower and cabbage on his remaining 2.5 acres.

But he is convinced the “party” won’t last. “Already, I am hearing about pressure being applied to the Central government to import SMP (skimmed milk powder). They say that there is a milk shortage and if we don’t import, consumers in Delhi and Mumbai will have to pay more. We have seen what the government has done in the case of onions, where the imported produce will arrive just when the crop is being harvested. Did anybody bother when farmers were realizing Rs 22/litre for milk and Rs 5-6/kg for onion last year?” he says.

For now, for dairy farmers, 2019 is promising to end on a sweet note.

On December 15, the Maharashtra Milk Producers and Processors Welfare Association the Pune-based umbrella body of cooperative and private dairies in the state announced a Re 1 hike in the purchase price for standard cow milk (3.5% fat and 8.5% SNF) to Rs 29 per liter. Most dairies were already paying this rate since the beginning of this month. The association which had previously “agreed” to revise upwards the procurement price from Rs 22 to Rs 25/litre in April and Rs 28 in September also decided to increase the maximum retail price of toned milk (with 3% fat and 8.5% SNF) sold in pouches by Rs 2/litre. Depending on the brand, consumers are now paying Rs 44-46 per liter.

Dairies are being forced to shell out more, even as their procurement volumes have registered a drop. Dashrath Mane, chairman and managing director of Sonai Dairy (the company is called Indapur Dairy & Milk Products Ltd), admits that his current milk collection is only 17 lakh liters per day (LLPD), as against 22 LLPD a year ago. Sandeep Jagtap, chairman of the Baramati Taluka Cooperative Milk Producers Union, says that his dairy’s normal procurement after October is 2.5-2.8 LLPD, “but we are right now doing just about 2.1 LLPD”. The Baramati union was also offering its farmers only Rs 19 per liter in December 2018, which has since gone up to Rs 29.

The above dip in procurement alongside the higher price for milk has flummoxed the dairy industry. The period from October to March is considered the “flush” season, when animals tend to produce more milk, due to enhanced fodder and water availability, besides reduced body stress on account of lower temperatures and humidity. But this time, “there has hardly been any flush and it has not commenced when we are already in December”, notes Arun Narke, director of the Kolhapur District Cooperative Milk Producers’ Union. His cooperative, which markets pouch milk under the ‘Gokul’ brand, is reporting about 2.5 LLPD less procurement compared to its normal 12 LLPD or so for this period. Industry insiders estimate total procurement by organized dairies across Maharashtra to have fallen to 110-115 LLPD, from the normal of 150-160 LLPD for October-December.

The decline in milk availability, despite the onset of winter, is being attributed mainly to an extended monsoon and rains right up to early November. “The fields where animals graze have been waterlogged. The grass cannot fully come up unless the water goes down. Even the green fodder that farmers are themselves cultivating has more moisture and less dry matter, which limits crude protein availability for milk production. That’s why the flush hasn’t set in,” explains R G Chandramogan, the managing director of the Chennai-based Hatsun Agro Product Ltd, India’s largest private dairy company. Sonai Dairy’s Mane is optimistic that the milk shortage being experienced is “temporary” and “the flush season will take off in January”.

However, Rahul Kumar of Lactalis India believes that milk purchase prices shooting up 10-15% during the so-called flush period, and domestic SMP rates doubling from Rs 150 to Rs 300 per kg in the last one year, is a “red alert” about availability in the coming months. “India produced 186 million tonnes of milk during 2018-19. This year, it will be lower, which has never happened in the last several decades. It’s high time the Centre assesses the situation on the ground and takes a quick decision on allowing imports of SMP and butter oil. Otherwise, we can expect another round of retail milk price increase by March 2020, even before the summer lean season,” warns the managing director of the Indian subsidiary of the French multinational dairy products corporation Lactalis.

Others in the industry disagree, though. “The government can open up imports, but we will, then, be forced to slash procurement prices back to Rs 20 levels,” says Jagtap.

According to Chandramogan, the present crisis, even if temporary, is a result of poor planning. “For the last three years or more, dairies were saddled with surplus powder stocks that they were struggling to dispose of. In 2018-19, the government provided a subsidy of Rs 50/kg to cooperatives for exporting some 50,000 tonnes of SMP, which cost Rs 250 crore. If instead, a buffer stock had been created, through the purchase of 100,000 tonnes from our dairies at the production cost of Rs 180/kg, the government would have spent Rs 1,800 crore and still booked a profit by selling at Rs 250/kg now. If you fail to plan, you plan to fail,” he points out.

Meanwhile, Ganesh Mansuke, 40, has his take on the situation.

Back in January 2018, this farmer from Katewadi the village in Pune district’s Baramati taluka to which former Union agriculture minister and Nationalist Congress Party supremo Sharad Pawar also belongs was forced to sell 30 of his 42 cows, as he couldn’t sustain continuous losses by selling up to 500 liters of milk daily at Rs 21-22/litre. “Today, my sales from 12 animals, five of them in milk, are down to 70 liters, but at least I am getting Rs 29 per liter. Would the government want me to sell my remaining cows as well? How will the consumer benefit if people like me go out of business and stop producing milk?” quips Manske, who also grows fodder crops of 1.5 acres and sugarcane on 2 acres of his 3.5-acre land.