After drought: Indian milk surplus predicted

Friday May 28 2010 India is heading for a milk surplus this year, say industry experts, after a good monsoon season and higher prices which followed last year's drought. Last year, India had 22% less rainfall than average. This year, monsoon rainfall in April was 98% of the long-term average, according to the India Meteorological Department. Milk surpluses have already built up in the central state of Maharashtra, east of Mumbai. Hatsun Agro, which handles 1.8 million litres milk a day, expects surpluses to appear in northern states over the next two to three months. Managing director R C Chandramogan said that even a marginal increase could have a huge impact. "If the surplus milk is processed, the supply of skimmed milk powder and butter oil will be abundant. This will affect margins of processing units and drive them to pay less for milk," he told India's Business Standard. Milk powder prices have not risen this year despite greater seasonal demand. "Prices used to move up in summer due to high demand for milk powder for ice-cream and milk-based beverages. This time prices have remained stable at Rs135/kg to Rd140/kg," he said. Other processors are said to share Chandramogan's view. But the concern is that high Indian milk prices will make it difficult for processors to enter export markets. The Indian Dairy Association is being urged to lobby for export incentives.