🥛Milk Getting Costlier? Here's Why?
Milk prices are on the rise with more hikes coming our way. Here's what brought these prices to a boil.
The price of your morning cuppa tea or coffee has now increased.Â
Both Amul and Mother Dairy have announced a hike of Rs. 2/litre on milk prices.Â
But surprisingly this increase is coming as the Wholesale Price Inflation (WPI), and particularly the WPI in milk, is going down.Â
So, what exactly is behind this increase in milk prices?Â
📈 Milk Prices On A Boil?
Like most things, this increase in milk prices is due to two reasons:
Low Supply
High Demand
Now, let's dissect why supply is low and demand is high.
As you may have already noticed, India's weather has been a little too erratic lately.
It is either too hot with no rains, or it's just non-stop rains drowning out everything.
This erratic weather is definitely not good for us, but it is worse for the crops.
In July, 800,000 hectares of crops were destroyed in Maharashtra alone because of heavy rains.
With fewer crops now available, the prices of produce are set to go up.
Now, this doesn't just make food expensive for you and I, but also for cows and buffaloes.
Yes, these cattle also need food to supply milk and if their cattle feed is expensive, prices of milk are bound to go up.
And cattle feed prices have increased by 15%-20%.
Many farmers can't afford this expensive cattle feed, so they're feeding their cows less, which is reducing the milk supply.
This is why Amul is raising milk prices as it wants to pay its farmers more money to take good care of the cattle.
But there's yet another aspect that is reducing milk supply: Lumpy Skin Disease.
It is a viral infection spread in cattle through insects and can cause death.
This disease is currently spreading through several Indian states like Gujarat, Haryana and Punjab, putting thousands of cows and buffaloes at risk.
It is serious enough that some state governments are urging that it should be declared a pandemic so proper precaution measures can be taken.
The disease has also caused milk supply to reduce. And while vaccines are being developed for the disease, no one can predict when we will be able to get it under control.
Now, that's enough about the supply side issues but what about the demand side?
For the last two years milk demand had gone down because weddings and other festivities were downscaled, hotels were shuttered.
But now that full-blown shaadis and wanderlust have arrived back on the scene, the demand for milk has suddenly risen.
Plus, a few months back, the demand for skimmed milk was very high in the international markets, so a lot of milk powder was being exported out of the country, reducing our supplies.Â
All of these factors combined have led to the Rs. 2/litre increase.Â
But why now? When WPI, especially for milk, has come down from  6.35%  in  June to 5.45% in July.
Well, milk prices have been rising over the last few months by 5%-8% but companies don't like to pass on the entire increased cost of production they are bearing at once. Afterall a sudden Rs. 10 hike would probably make you stop buying milk altogether. But a gradual increase of Rs. 2 a couple of months will not destroy demand by a lot.
🤔 Impact on India's Health
However, this Rs. 2 increase could still have a devastating impact on a country where 70.5% of the population cannot afford a nutritious diet.
And this number was calculated way back in 2020, when the average price of a nutritious diet was Rs. 7,600/month for a family of four.Â
With the recent rise in food inflation, and the 12% GST on milk products, a nutritious meal could be out of reach for a lot more Indians.
This could impact the overall growth and development of our country.
So, will milk prices be going down any time soon to reduce this burden on the common public?
No, on the contrary, prices are set to rise at least one more time until October. After that we could see prices go down as the peak lactation period will set in from October to February, which will once again increase milk supplies.
Until then we'll just have to bear the brunt of these high prices.
âš¡In a line: Milk prices are rising because of a tragic mismatch between supply and demand and it could have a massive impact on India's Health.
💡Quick question: What commodity will see a rise in prices next?
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