Glimmer of hope: Pulses, milk prices fall

IS THE worst of food inflation — 8.38 per cent year-on-year in April — over? Some hope is provided by milk, which has the highest weight among food items in the consumer price index after cereals. And also pulses, besides the likes of onion and potato.

International prices of dairy commodities have fallen off a cliff in the past month, and the effects are percolating to India as well.

The average price of skim milk powder (SMP) at the Global Dairy Trade fortnightly auction platform hit a high of $4,599 per tonne on April 5, almost twice its early-May 2020 low of $2,373. But that price has since eased to $4,130 per tonne in the latest May 3 auction.

“Prices had gone up to unsustainable levels. Milk fat prices were also partly rising along with vegetable fats, especially palm oil,” said R S Sodhi, managing director of the Gujarat Cooperative Milk Marketing Federation, better known as Amul.

The impact of demand destruction — buyers balking at record high prices — is being felt in India, too. Since mid-April, dairies have lowered prices of SMP and white butter produced from buffalo milk, from Rs 320/kg to Rs 300/kg and Rs 375/kg to Rs 365/kg, respectively. Ex-factory prices of cow milk SMP have also dropped from Rs 315/kg to Rs 295/kg in Karnataka and from Rs 295/kg to Rs 275/kg in Maharashtra; yellow cow butter from Rs 405/kg to Rs 395/kg in Karnataka and from Rs 400/kg to Rs 380/kg in Maharashtra.

According to Ganesan Palaniappan, a leading Chennai-based dairy commodities trader, there are two reasons for the fall in prices. First, domestic prices are tracking the global decline, over 15.5 per cent since mid-March for milk fat. Second, the early pre-monsoon showers in Karnataka and Tamil Nadu — normally from around the first week of May, it was 15 days early this time. “Cows start producing more milk with the rains, which aid fodder growth. Traders are destocking seeing the rains, anticipating a pick-up in milk arrivals,” he said.