Milk turns sour as sales tank in season of glut

Households consumed more milk, cheese and yogurt during the lockdown, raising sales by up to 25% in large dairies, such as Amul. But that has not been enough to offset the sharp decline in demand from commercial buyers, such as hotels, confectioners and restaurants, which account for nearly 20% of the organised dairy sector’s revenues.

This has triggered an inventory build-up crisis.

This year should have been a bright one. Good rains during winter made for cheaper fodder, the key input for cattle. As a result, the flush season (typically from October to March), which sees higher milk output production, stretched into April and May, leading to a twomonth oversupply. A limping hospitality sector, however, has cut sales in the last two months, analysts say. Revenue from ice-cream, cheese, flavoured milk, curd and yoghurt, among other items, which give higher profits than liquid milk, have tanked. Processed dairy items make up a third of the organised dairy sector’s revenues. The effects of a revenue crisis in larger dairies ultimately ripple into smaller ones, who, on cue, pass on lower prices to unorganised farmers.

India is the largest producer of milk in the world. In the past four years, output has grown by over 6% every year. Production is expected to be 177 million tonnes in 2019-20. Nearly 70 million rural households are occupied in dairy farming.

From a dairy owner’s perspective, the more lucrative sales come from what is internally called the ‘Horeca’ segment, an industry acronym for ‘hotel, restaurant and canteen’ sales. “Dairies in which commercial sales to the hospitality sector have a larger share have taken a larger hit,” said Abhishek Agrawal of Comtrade, a commodities trading firm.