COMPOSITION AND DIRECTION OF INDIA'S DAIRY EXPORT

 

OVERVIEW:

India stands first in milk production with share of ~19 % in world (2018). CAGR of dairy industry of India is expected to be ~14.8% between FY 2018 and FY 2023.   It can be said that milk is the largest crop in India in terms of value at 10,527bn INR because of its total value is more than paddy and wheat  put together and is supposed to reach 18,599bn INR till 2023. Dairy sector accounts for 26% to total agriculture GDP. India’s dairy export was 51421.85MT to the world and had foreign exchange value of  1341.03 Crore or186.71 USD Millions in 2019-2020. According to APEDA, India ranks 36 in world dairy exporting countries and export to 62 countries , among these major export destinations are UAE, Bhutan, Turkey, Egypt and USA. Dairy products exported by India are Skim Milk Powder (SMP), butter, Whole Milk Powder ( WMP), Casein, cheese and Ghee. Among these SMP saw the largest growth at 292 %.

COMPOSITION OF INDIA’S DAIRY EXPORT:

Brief comparison with world statics: 

Value/quantity comparison

Note: Though India is leading milk product its export of dairy products and the value is nil at global level.

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World top dairy companies:

Source: IFCN data collection and AAFC ( Agriculture and Agri -Food Canada) :

 1. Milk volume collected and dairy commodity purchases (in milk equivalent) for the  company and its subsidiaries. Milk intake figures in mill tons

 2. Turnover per kg milk: Dairy turnover divided by milk intake. This indicator gives an indication of value creation per kg of milk processed.

World’s Leading dairy traders:

 The world dairy export market is highly concentrated over the trade of cheese, butter, WMP, SMP while Yogurt and dessert have recent grown up market shares. The major traders of these products are shown in above list. Germany with 15% market share leads, followed by France, New Zealand, Netherland, Belgium, USA, and Denmark.

India’s position in world dairy trade:

·        India had exported dairy products worth Rs 3,39,983 lakh in (2018-19) and Rs 2,03,513 lakh in 2019-20. India is also looking at reducing its import dependence. It currently has a very limited import, majority of which is protein powder. India Imported dairy products worth Rs1,58,315.69 lakh in 2018-19 and Rs 112641.43 lakh during 2019-20.

·        Not just dairy products, India also imports plant and machinery that helps in dairy production, preservation, etc. India imported dairy machinery worth Rs 8,478.37 lakh during 2019-20 and exported dairy machinery worth Rs 11,195.81 lakh during 2019-20.

·        India is in way to boost dairy products processing capacity from current 53.5 million tonnes (MT) to 108 million tonnes (MT) in next 5 years India’s export and import have shown growth in past decade, instead the dairy export is more than the import but still India’s export is far beyond its real potential. The major causes of this are: high population, lower milk processing, 

·        high cost of transportation, lack of GMP practices, low quality products and highly protected world dairy market.

·        Major Dairy products exported by India are SMP, butter, WMP, Casein and ghee.  Others:  butter oil, milk and cream in powder, butter milk, cheese (fresh cheese, processed cheese, skimmed milk, whole milk, cottage cheese (paneer), khoya, cheddar cheese, mozzarella cheese, milk and milk food for babies, milk cream sweetened condensed milk, whey.

·        India is second largest exporter of Dairy product after China in Asia. The major export destinations of Indian dairy products are mostly developing countries, namely, Bangladesh, UAE, Pakistan, Nepal and Bhutan.

·        From 54,828 MT in FY 2017-18, dairy exports rose to 1,23,877 MT in the last financial year wiyh highest growth in Skimmed milk powder. In 2018-19, India’s dairy exports rose 126 per cent to 1,23,877 million tonnes (MT) — roughly estimated to be worth Rs 2,700 crore — from 54,828 MT in the previous fiscal, according to the Ministry of Animal Husbandry, Dairying and Fisheries.

·         Turkey, UAE, Egypt, Bangladesh and Bhutan are the major markets for India’s dairy exports.

Direction of Indian Dairy Trade:

·        Apart from skimmed milk powder, the export of butter, ghee and butter oil too saw a good growth — from 16,616.32 MT in 2017-18 to 46,137.92 MT in FY 2018-19.

·         Cheese being a value added product its export needs to be increased along with an increase in quality as most of India’s exported products are for diaspora, like ‘lassi’, but other products still don’t meet global standards

·        During 2018-19, the export of butter, ghee and butter oil nearly tripled at 46,137 metric tons, as compared to 16,616 metric tons exported during 2017-18.

·        According to ministry of commerce and industry India, Dairy products export decreased to 73.33 USD Million in 2020 from 244.18 USD Million in 2019.

·        From India, the export of dairy products has increased to countries like Bhutan, Afghanistan, Canada, Egypt and the United Arab Emirates. India has also imported a significant amount of dairy products from countries like France, New Zealand, Ireland, Ukraine and Italy.

SWOT analysis of India's dairy trade:

Strengths:

·        Demand profile is absolutely optimistic.

·         Quite reasonable margin even on packed liquid milk.

·        Raw milk can be used to make many dairy products i.e. a well-defined product line.

·        Easily available raw material i.e.  Raw milk.

·        Easily available manpower.

·        Special attention by GOVT. agencies to agriculture sector to double agriculture produces.

 

Weaknesses:

·        Perishability: Dairy products have short shelf life. Thus require proper handling conditions and faster supply time.

·         Little control over milk yield:  Developments like embryo transplant, artificial insemination and properly managed animal husbandry practices, coupled with higher income to rural milk producers can lead to improvement in milk yields.

·        Logistics of procurement: problematic milk procurement because of bad roads and inadequate transportation facility. The solution is overall economic improvement in India.

·        Problematic distribution:  All suppliers are not well with distribution.  However, linking cold chain network can solve the issue.

·        Competition: daily new competitors entering the market make the competition tough.

·        Low quality produce: Major cause of low export to developed countries is that, most Indian dairy products don’t meet the legal standards for mutual trade.

·        Domestic market: Most of the milk produce in India is consumed here only due to its big domestic market.

Opportunities:

·        Value addition: Milk can be easily converted into value added products like shrikhand, ice creams, paneer, khoa, flavored milk, dairy sweets, etc. There is a phenomenal scope for innovations in product development, packaging and presentation. Addition of cultured products like yoghurt and cheese lend further strength – both in terms of utilization of resources and presence in the market place.

·        A lateral view opens up opportunities in milk proteins through casein, caseinates and other dietary proteins, further opening up export opportunities.

·        Increasing need for infant foods, geriatric foods and nutritionals.

·        Export potential:. Following the new GATT treaty, opportunities will increase tremendously for the export of agri-products in general and dairy products in particular.

·        Acc. to CNBC-TV18 report, the enhanced productivity can boost India’s export share in the world from 0.36 percent to 10 percent of dairy products.

 

Threats:

·         Milk vendors, the un-organized sector: Today milk vendors are occupying the pride of place in the industry. Unorganized sector covers a huge share of dairy product market and makes the company bind to keep the price competitive to their pricing.

·         Lack of proper feed and fodder for milch animals: Recurring droughts and floods or high usage of agricultural crop residues by producers of fibre  board, paper and liquid fuels affect the production of fodder in India. Sufficient quantities of feed and fodder are required for proper animal rearing and milk production.

·         Lack of cold storage: India lacks in terms of availability of cold storages which results in wastage of dairy output.

·         The study of this SWOT analysis shows that the ‘strengths’ and ‘opportunities’ far outweigh ‘weaknesses’ and ‘threats’. Strengths and opportunities are fundamental and weaknesses and threats are transitory

The Indian dairy industry, following its delicensing has been attracting a large number of entrepreneurs. Their success in dairying depends on factors such as an efficient yet economical procurement network, hygienic and cost-effective processing facilities and innovativeness in the market place. All that needs to be done is: to innovate, convert products into commercially exploitable ideas.