Global dairy production: changing scenario

India’s dairy sector may witness the ups and downs in exports in the days to come. Chances of enhanced export to Russia are more, thanks to the Ukraine crisis and the ‘expression of satisfaction’ by Rosselkhoznadzor, Russia’s Phyto- sanitary inspection agency over the Indian dairy plants. Russia is required to import more dairy products from India, on the face of restrictions by the European Union to export its products.

Russia imported of 500 million tonnes dairy products annually and products worth $3 billion were from the EU alone. Since August 2014, Russia imposed a prohibition on imports from US, Canada, Norway and Australia besides EU. India’s exports of dairy products stood at 159228 tonnes worth ₹3318. 53 crores in 2013-14. Bangladesh, Nepal, Bhutan, Maldives, Egypt, UAE, Algeria, Yemen and Pakistan were the major importers of Indian dairy products. Bangladesh, Nepal, Bhutan and Maldives have reduced the import duty of milk and dairy products to zero level. And with the opening up of Russia’s markets, the exports are expected to grow by another $400 million.

The Indian milk and milk-products producers are likely to be adversely affected as the European Union (EU) stops the ‘Milk Quota System’ among its member nations. It was in July 1983, the EU proposed to put in the milk quota system to address the overproduction of milk and dairy products by member nations. Each individual producer / purchaser had to ante up a super levy if it passed the quota. Though the measure was intended for 5 years, the death dates were taken over several times and finally brought to a halt by 31 March 2015. The primary reasons to terminate the system are:

1. The consumption of dairy products increased substantially worldwide.
2. The quota system prevents the EU manufacturers to respond to the ever growing worldwide market.
3. The prospects of benefit to the 650000 dairy farmers, 5400 dairy processing plants with 300000 employees of EU member countries.
4. The dairy exports of EU increased by 45%in volume and 95% in value even while the milk quota system was in force.
5. Value added products have unlimited potential in global markets.

Internationally, the prices of cattle feed ingredients slumped and the farming costs declined. China started producing more milk and dairy products and cut down imports. Ban on exports to Russia naturally prompts European Union to cut imports too. All these factors together lead to an international gut in milk and dairy products. India have already opened its markets for international trade sequel to the tariffs imposed by WTO  The demand for milk, dairy products and value added products rise in India, thanks to: population growth, faster economic growth, rapid urbanization, rising income levels, changing food habits and technological innovations.

The prospects of exports to Russia is more but exports to EU and other countries may face stiff competition. Though the domestic demand is more, so is the competition from global producers. So to empower itself, India needs to reinvent on the production front. Innovation across the whole dairy chain, evolving more value added products, emphasis on R&D, developing strong brand images, developing strong marketing strategies both on international and domestic markets may collectively drive India conquer new heights.