According to rating agency ICRA’s recent report, the domestic milk production in FY 2022 is estimated to increase by 5-6 per cent. Post the moderate impact of the pandemic, the industry has witnessed a steady recovery in consumption across end segments.
This has been further aided by the improving pace of vaccination, fall in fresh Covid-19 cases, revival in economic activities; and demand from institutional and hotel, restaurant and café (HoReCa) segments that have recovered sharply.
Meanwhile, the sale of liquid milk continues to be supported by the in-elastic nature of demand. There has also been an increase in consumption of value-added dairy products (VADP)s like ghee, butter, curd, cheese etc. All this has supported the overall dairy sales.
Further, with stable milk procurement and lower demand amidst pandemic during FY2021, most industry players have converted excess liquid milk to skimmed milk powder (SMP) thus resulting in elevated inventory levels and subdued SMP prices. The same is expected to be liquidated in the current year supported by a revival in demand.
ICRA expects the industry-wide demand to grow by 9-11 per cent in FY2022 and maintains a stable outlook over the long term.
Sheetal Sharad, Vice President, and Sector Head, ICRA, said, “Demand recovery was stunted by the resurgence in Covid-19 cases in Q1 FY2022, and the impact was severe in institutional segments. However, there has been a healthy revival in demand in recent months with sharp fall in fresh Covid cases and resumption in business activities”.
Growth in the liquid milk segment, which accounts for over half of the dairy industry, shall remain stable at 6-7 per cent in FY2022, while the majority of VADP (value added dairy products) categories is estimated to grow by 13-15 per cent.
However, demand recovery of a few VADP categories such as frozen yogurt, ice cream etc., shall be slow with consumers’ aversion for cold dairy products post-pandemic. With an expected recovery in demand during the festive season, SMP prices are also likely to improve and lead to the liquidation of stocks in FY2022. Raw milk procurement prices, which were subdued in FY2021 due to weak demand, have increased in the current fiscal supported by a recovery in demand.