India Milk Production Soars Adding to Global Oversupply

February 26th, 2016


Category: Dairy

milk jugs450x299(AgWeb) – Over the past two years, India’s dairy industry has rapidly expanded. The second most-populous country in the world is also its largest producer and consumer of butter. In fact, India produces and consumes about half of the world’s butter.

“The global dairy trade focuses more on Europe, the United States, and New Zealand, because they are bigger players in export markets,” says Sarina Sharp, agricultural economist with the Daily Dairy Report. “But growth in Indian milk production is a big part of the global oversupply story because, like China, India’s growing domestic production has displaced imports.”

For instance, according to GITS data compiled by theDaily Dairy Report, India imported 71.5 million pounds of skim milk powder (SMP) in 2011. By comparison, during the first 11 months of last year, India imported just 465,481 pounds of SMP. That said, India’s imports tend to fluctuate from year to year.

“Milk production is gushing in India,” says Sharp. Production of cow and buffalo milk in the 2014-15 season reached a record-breaking 146.3 million metric tons, up 6.3 percent from the previous season, according to India’s minister of agriculture.

Taking both cow and buffalo milk into account, India is the world’s largest milk-producing country. Excluding buffalo milk, India ranks third behind the European Union and the United States in milk production. To put Indian production into context, Sharp notes that India produces three times as much cow’s milk as New Zealand.

According to USDA’s semi-annual Dairy: World Markets and Trade report, India’s cows produced 64 million metric tons of milk in 2015, up 5.8 percent from 2014 and an astounding 11.3 percent over the two-year period from 2013 to 2015.

“By comparison, over the same two-year period, European dairy producers increased milk output by only 5.7 percent, spurred by sky-high prices in 2014 and the expiration of quota last year,” notes Sharp.

While most analysts have focused on EU milk production growth since quota was eliminated last spring, EU output growth is expected to slow after the initial post-quota surge, notes Sharp. “However, India’s milk surge is nowhere near a plateau,” she adds.

To illustrate, EU producers added 364,000 milk cows since the end of 2013. In 2016, USDA expects the total number of EU milk cows to decline slightly to 23.55 million head. In contrast, India’s milk cow numbers grew by 4.25 million head from the end of 2013 to the end of 2015, and USDA expects Indian dairy producers to add another 2 million head this year, pushing the Indian herd to 54.5 million head and total year-over-year cow’s milk production in 2016 up 6.25 percent in 2016.

“That is a substantial amount of extra milk that will be added to global supply,” Sharp adds.

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