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Updated: June 25, 2012 06:20 IST

KMF looks to market its huge stock of milk powder

Sharath S. Srivatsa
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A file photo of a milk powder plant in Bangalore. The increase in milk procurement across Karnataka is currently around 51.93 lakh kg daily. Photo: Sampath Kumar G.P.
The Hindu
A file photo of a milk powder plant in Bangalore. The increase in milk procurement across Karnataka is currently around 51.93 lakh kg daily. Photo: Sampath Kumar G.P.

Federation has three times the usual stock of SMP owing to record milk procurement

Deficient rainfall or a delayed monsoon in the country could bail out the Karnataka Milk Federation (KMF), which currently stocks 6,000 tonnes of skimmed milk powder (SMP) following a record increase in milk procurement in recent months.

While in the past, the average stock of SMP was around 2,000 tonnes, it shot up to 6,000 tonnes after the average daily procurement of milk went up by 23 per cent over the last year.

The increase in milk procurement across the State, which is currently around 51.93 lakh kg daily, surprised experts, who expected KMF to reach the figure only by 2015-16.

The federation was hoping for a rise in demand from the northeast and eastern States, where the availability of milk was low and could further decline in the event of deficient rainfall or delayed monsson.

The shelf life of SMP is one year. According to sources in the KMF, there was a steep increase in stock because the daily surplus milk went up from about 5 lakh litres to about 14 lakh litres. While the daily procurement was around 52 lakh kg, the federation used only about 38 lakh litres as liquid milk, curd, UHT (Goodlife) milk and milk products. “As a farmers’ cooperative, we cannot refuse milk from members,” said the sources.

Currently, India has about 1.7 lakh tonnes of SMP, of which about 1 lakh tonnes is with milk federations, according to the sources. This was due to a ban imposed in February 2011 on the export of SMP by the Centre, which also allowed for duty free import of 50,000 tonnes of SMP to overcome milk shortage, they said. However, the Union government lifted the export ban about a fortnight ago. The KMF may not be able to sell SMP in the market at the prevailing price with the international price chart released by New Zealand-based Fonterra being lower than its production cost.

“The current price of around Rs. 158 a kg is lower than our production cost. We will break even if the price crosses Rs. 165 a kg. The federation would also lose heavily because the transportation cost is additional,” sources said, adding that last year, the KMF sold SMP for an average price of Rs. 180 a kg, with the highest price being Rs. 200 a kg. In recent weeks, the price dropped to Rs. 145 a kg.

Meanwhile, a top official said the KMF was not panicking and was hopeful of finding markets, and pointed out that the federation sold nearly 2,000 tonnes of SMP in January. “We are also expecting demand for SMP from State federations that are not big milk producers,” the official said.

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