Will India’s dairy market matter to the world?
India’s milk collections will grow to almost 200bn kg in 2021, growth of 6.4% per year on average for the 5 years to 2018/19, but at a slower rate in the recent years. The data comes from surveys. It could be wildly inaccurate, but no-one knows or seems to care
The government estimated that a bit over half its milk (still that is more than 100bn kg!) is processed and, of that 20% (20 bn kg) is processed by the “organised” sector of co-operatives and farmer owned operations. A similar volume is processed by large private companies.
The remaining 60bn kg is processed by the “unorganised” sector of small private processors and milkmen. This leaves about 100bn kg (close to the size of the US industry) which is kept in about 80 million household and village herds, consumed mostly as raw milk and ghee.
The volume collected by the organised sector is growing quickly to attempt to keep pace with rising national demand. Liquid milk consumption was about 80bn kg in 2020, which includes household consumption in rural villages. Skim milk powder production is rising quickly to meet demand from value-added dairy products such as ice-cream and desserts, confectionery, and wider food processing sector.
In reality, dairy output can’t keep up with the growth in demand as livelihoods improve. The greatest challenge is not in developing markets but getting enough product to consumers.
Growth in the national herd is inhibited by the lack of feed and the low-input production systems. Cow productivity has risen slowly but the composition of herds is changing with the formal market and supply chain expansion, which favours higher-yielding breeds that suit commercial dairy facilities.
What does this impact?
It is unlikely India’s involvement in the world market will change much – there will be little tolerance for commodity imports unless it experiences climate disasters, while the milk cost base and troublesome logistics will limit competitiveness in exports. That could all change and hence we have built India into our LongView DTS as an optional component of the effective world market for dairy commodities.