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India’s milk powder exports to surge on subsidies, dampen global prices

A massive milk glut in India could hit international prices for dry milk powder after government subsidies aimed at supporting local farmers look set to spur a nine fold surge in exports, industry officials told Reuters.

India’s skimmed milk powder (SMP) exports are expected to rise to 100,000 tonnes in the 2018/19 fiscal year as rare government incentives spur overseas sales and make shipments from the world’s biggest milk producer competitive on the global market.

The rise in shipments from India could weigh on global SMP prices that have more than halved in four years due to surplus supplies, according to analysts and industry officials.

The exports will also help India bring down inventories that have dragged local raw milk prices to three year lows and below cost of the production, sparking widespread farmer protests.

In the wake of the protests, the western states of Gujarat and Maharashtra, India’s leading milk producers, offered a 50,000 rupees ($727.86) a tonne subsidy for exports of SMP, while the central government approved a further subsidy of 10 percent of the export price.

“India was not exporting a big quantity. The government assistance will revive exports in coming months,” said R. S. Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation Ltd, the country’s biggest milk processor.

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