Market trends

Background

India's demand for dairy products increasing

According to Rabobank the demand for dairy products in India will increase by 4%. Will India be able to keep with the demand?

In India, the world’s largest milk producer, there are around 70 million small-scale producers. India is expected to produce 175 billion litres of milk this year, which is nearly twice what the US – the 2nd biggest milk producing nation – is expected to produce.

According to Rabobank, forecasts suggest milk production will increase by 4% in India in 2020, which equates to an additional 9.7 billion litres of milk, equivalent to 65% of UK’s production in 2018.

The anticipated growth in production next year is expected to come from higher numbers of cows rather than increases in yield. About 40% of all the milk produced is consumed within the producer’s household, and 35% sent to small-scale local processors. Only about a quarter of milk produced is delivered to larger companies or co-operatives.

FAO suggests that consumption of fresh dairy products in India is expected to increase by 2.3% a year, reaching 108kg per capita in 2028.

Indian dairy exports have increased substantially, but remain relatively small on a global scale.Photo: Chris McCullogh
Indian dairy exports have increased substantially, but remain relatively small on a global scale.Photo: Chris McCullogh

Exported produce

India exported 94,000 tonnes of dairy products in 2018, valued at nearly US$290 million. Butter and other dairy fats (including ghee) make up the majority of exports, accounting for 65% in volume terms.

Exports of milk powders were particularly high last year, as government intervention during a milk glut led to large national stockpiles of skimmed milk powder.

Indian dairy exports have increased substantially, but remain relatively small on a global scale. An increase in exports of butter (including ghee) and skimmed milk powder has driven the majority of the growth so far in 2019 with Bangladesh, Egypt and the United Arab Emirates as the main export destinations.

Interestingly, Indian farmers often keep a few buffalo and have an average milk yield of 1,360 litres per cow per year. Buffalo produce milk that is higher in fat and attracts higher milk prices.