indian dairy industry: fta challenges

Indian Dairy industry: FTA Challenges

Contents–World dairy scenario

– Indian dairy scenario

–FTA Challenges

World Dairy Scenario

World Dairy Industry7.7 billion consumers

Provides livelihood to 1 billion through Dairy Farming

Projected Milk Production in Current Yr: 830 Million Metric

Tonne/year

390 billion ltrs of milk is processed across the globe

World Milk Production

World milk production: 830MMT

MMT: Million Metric Tonne

India is No. 1 Milk Producer

180 MMT (20% of world)Source: FAO

Milk production status since last 60 years

18

20

138

186

10 108

13 15

57

84

94

154

169

0

20

40

60

80

100

120

140

160

180

200

1961 1971 1981 1991 1996 1998 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2013 2015 2016 2017

India Australia Netherlands USA European Union

CAGR India: 4.5%, USA: 1.8%, EU : 1.3%, AUS: 1.3% and Netherland: 2.7%In MMT/year

Milk production of India, Australia and Netherlands was almost similar

India

EU

USA

Netherland

Source: FAO

5 7 10 14 17 20

14 1312

13 1212

71 71 6858 56 52

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1970 1980 1990 2000 2010 2017

India Australia Denmark New Zealand United States of America Brazil Pakistan Rest of the world

Source: FAO

Comparison with major countriesEUROPE USAINDIA

Milk Production (MMT per year)

~~

>

168 MMT176 MMT 95 MMT

Milk Solids (MMT per year)

159 MMT192 MMT 89 MMT

1 2 3

Source: IFCN

Growth in Milk Production : Last 5 years

Among highest growth in Milk Production

Status of self sufficiency for milk 2017

India is 100% self sufficient in Milk consumption.• Huge potential for export in neighboring milk deficit nations

% Share of Dairy sector in total Agricultural Production

India @ 26% is among the highest in the world

Source: IFCN

Average dairy farms

India: 2

Source: IFCN

Indian Dairy Scenario

•Agriculture: 18% contribution to GDP and employment to 60% ofpopulation

•Livestock sector-Largest contributor to Agriculture GDP ( ~ 30%)

•Milk is the largest ‘Agricultural Crop’ of India (INR 7 Lakh crores per year)

•Dairy is a supplementary source of income for >100 million families

70% of rural households have less than one hectare of land

SUSTAINABLE LIVELIHOOD

Cultivation

Dairying

Research studies have reported reduction in rural poverty being more responsive to growth in the livestock sector than growth in the crop sector

Average farm household income (Rs. /month)

In recent years, maximum growth in rural income has been from Livestocksector

Particulars Amount in Rs.

% of Income

% CAGR growth in income from Various sources during 2003 to 2013

Cultivation 3078 48 3.7Livestock 765 12 14.3

Wages/Salary 2069 32 1.4Non-Farm Business 514 8 -0.1

Total farmers income 6426 100 3.4

Source: NSSO

55% of total milk production

(97 MMT)

45% of total milk production(79 MMT)

Largest Bovine Population in the world : 300 Million

India: Small holder system

10 crores rural Households in India depend on dairying for livelihood.

77% Milk Production by small, marginal and landless farmers

0

100

200

300

400

500

600

700

800

900

1997

2000

2002

2003

2004

2006

2008

2009

2010

2011

2012

2014

2015

2018

World milk prodn 849 MMT

CAGR : 2%

0.0

50.0

100.0

150.0

200.0

India milk prodn 176 MMT

CAGR : 4.5%

World & India Milk Production

Milk Production: Total & Per Capita

Operation Flood (1970-1996)

17

20

21

23 3

2

54 6

6 69 72 8

1 93

12

2

14

6

17

6

130 126112

110 128

176195 200 205

217233

281

317

369

0

50

100

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200

250

300

350

400

0

20

40

60

80

100

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140

160

180

200

1950 1960 1968 1973 1980 1990 1995 1996 1997 2000 2004 2010 2014 2018

PE

R C

AP

ITA

AV

AIL

AB

ILIT

Y (

G/D

AY

)

MIL

K P

RO

DU

CT

ION

(M

MT

)

Milk Production in MMT

Milk Production growing at 4.5% CAGR in last 15 years

390 million

593 million

980 million

1342 million

Past Present Future

2000 +18 Years 2018 +15 Years 2033

World 560 270 830 247 1067

India 80 100 180 150 330

% Contribution by

India

14 20 31

Year

India’s Milk Production Situation and FutureAll data MMT/year

Source: IFCN

Competitiveness of Indian dairy products• Farmer’s share in consumer price :

Indian Farmer has the highest share of consumer price

Source: IFCN

Continuous higher price received by Indian farmers

Source: FAOSTAT

IndiaIndian dairy cooperativesensure that their farmersget 71 to 75% of ConsumersRupee spent on Milk & MilkProducts

NZ, AUS and EUIn NZ, producers get 30 %of consumers’ money spenton Milk and Milk productswhile in the Australia andin EU, producers get only27% and 40% respectively.

Dairy Cooperative ensures that 80% - 86% of consumer’s rupee goes back to its dairy

farmers

Supply and demand estimates as per NITI Aayog report

194

276

330

174

246

292

140

160

180

200

220

240

260

280

300

320

340

2016-17 2020-21 2021-22 2028-29 2029-30 2032-33

Supply of milk Demand of milk

Surplus of 38 MMT is estimated

Source: NITI Aayog's Working Group Report (Feb 2018) on Demand and Supply Projections towards 2033 for Crops, livestock, Fisheries and Agricultural Inputs indicates

World milk production estimate

Source: IFCN

FTA Challenges

Dairy Scenario in NZ – Over Producer of Milk

Item New Zealand India

Population 42 Lac 130 crore

Milk Production 22 MMT 180 MMT

Agriculture labour 3 Lac (7% of pop) 62 crore (52% of pop)

Dairy farmer 10,000 10 crore

Average farm size 419 1.8

Number of milch animals 50 Lac 131 million

Milk Yield (Lit per day) 13 LPD 3.5 LPD

GDP (PPP) US $ 189 billion US $ 5 trillion

Per Capita Income US $ 39,000 US$ 7,200

GDP from Agri 5.7% 17.4%

% of dairy product exported 93% (20.5 MMT ECM

exports)

Negligible

% Farmers’ share on consumer

price

30% 71%

Dairy Scenario in Australia – Over Producer of Milk

Item Australia India

Population 2.3 crore 130 crore


Agriculture labour 8 Lac (3.6% of pop) 62 crore (52% of pop)

Dairy farmer 6,300 10 crore


Number of milch animals 17 Lac 131 million

Milk Yield (Lit per day) 16 LPD 3.5 LPD

GDP (PPP) US $ 1.25 trillion US $ 5 trillion



% of dairy product exported 25% (2.2 MMT ECM exports) Negligible


price

27% 71%

Dairy Scenario in EU – Over Producer of MilkItem EU - 28 India

Population 51 crore 130 crore


Agriculture labour 80 Lac (1.6% of pop) 62 crore (52% of pop)

Dairy farmer 12.7 Lac 10 crore


Number of milch animals 23 million 131 million

Milk Yield (Lit per day) 19.5 LPD 3.5 LPD

GDP (PPP) US $ 20.85 trillion US $ 5 trillion



% of dairy product exported 10% (15.8 MMT ECM exports) Negligible


price

40% 71%

Impact of 5% of NZ Current export to IndiaProduct India Market Size

(MT) NZ current Export

(MT) Import from NZ (MT) % of market

SMP 300000 440000 22000 7%

WMP 12000 1400000 70000 583%

Total Powder 312000 1840000 92000 29%

Cheese 40000 320000 16000 40%

Butter / AMF 120000 500000 25000 21%

Total 472000 2660000 133000 28%

Value Added Product• The price of milk in Auckland is 2.5 times that of Delhi.

• Milk in Delhi is the most economical

Value Added Product• Developed world want to dump their surpluses in India

• And want lower duties to compensate their high cost

• With improving economy and increase in purchasing power,demand of value added product in India improving for Curd,Yogurt, Paneer, Cheese etc

• Indian dairy companies mfg all these to meet local taste anddemand – “Make In India” initiative

Value Added Product• Exotic cheese / GI cheese : Consumed by Elite class – why

reduce duty on it?

• Whey based high end / speciality products : Special purposeproduct

Feeding the Cattle• Small holder farming

• Use locally available resources

• Cattle feeding mainly on roughages & not free grazing

• No scarcity of roughages as India is likely to have healthygrowth in food grain & other crop production which will beresource for cattle

• Exaggerated claim of climate change and resource shortage

Learning 1 : India Edible Oil scenario

5.30

14.20

140.07

2829

61107

73039

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980

-19

81

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81-1

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Quantity (In Lakh Tonne) Value (Rs. in Crore)

Quantity import in Lakh tonne

Value in Rs. Crores

Liberalizing edible oil imports post WTO implementation in 1996-97

The entire industry has moved from 91% self-sufficiency to 65% import dependence in just 2 decades

Learning 2 : China FTA impact on milk production

7

20

28

3133 32 32

5

10

15

20

25

30

35

2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2015 2016 2017

Milk production (Million t ECM)

China signed FTA with New Zealand in the year 2007-08

Milk production growth (CAGR%)Year 2000 to 2006: 22%Year 2006 to 2017: 0.06%

China FTA impact on import of dairy products

7.3

4.33.5

15.3

18.6

20.3

0.0

5.0

10.0

15.0

20.0

25.0

2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2015 2016 2017

import of National cosnumption (%)

China signed FTA with New Zealand in the year 2007-08

• Canada: Government imposed duty of 250% for all dairyproducts.

• EU: Non Tariff barrier with high residual and pesticides limit.

• Australia: Doesn't permit of Non-retorted dairy products fromIndia.

• USA: High import duty and removed MFN status for dairy

• South Africa/Mexico/Venezuela/Chille: Doesn’t permit import ofdairy products from India

• New Zealand: Demand specialize veterinary certificate

Learning 3 : How other country protecting their producers

Impact of Duty reduction• Dairy product price will fall

• Farmgate price will also reduced by 50%

• Loss of about INR 3.5 Lac crore to farmers

Doubling Farmers’ Income - 2022

• Hon’ble Prime Ministers’ main focus

• Dairy contributes to 25% (Rs 7 lac crore) of total farm produce of the country (Rs 28 Lac crore)

• With permitting import at lower duty, farmer income will reduce drastically as farmgate prices will be lowered

• How can we double farmers’ income from dairy?

THANK YOU

India’s Dairy Exports

• India is net dairy product exporter• Regularly exports to USA, Australia, New Zealand,

Singapore, UAE, Saudi Arabia, Egypt, Oman,Bahrain

• India exported dairy products worth US$ 356million (Amul = US$ 117 million) in 2018-19 toabout 105 countries

India’s Dairy Exports

Qty in MT Value in US$ MillionHSCod

eCommodity 2017-18 2018-19 %Gr 2017-18 2018-19 %Gr

401MILK AND CREAM, NOT CONCENTRATED NOR CONTAINING ADDED SUGAR OR OTHER SWEETENING MATTER

8,857 10,183 15 8 9 19

402MLK AND CRM CNCNTD/CONTNG SUGR/SWETNG MATR 14,765 47,987 225 46 95 114

403BUTTR MLK,CRDLD MLK AND CRM,YOGRT,KPHIR AND OTHR FRMNTD ACDFD MLK AND CRM 688 809 18 2 1 -22

404WHEY AND PRDCTS CONSTNG OF NTRL MLK CNSTITNTW/N CONTAINING ADDED SGR OR SWEETENG MATTR 183 917 402 1 5 883

405BUTTER AND OTHER FATS AND OILS DERIVED FROM MILK; DAIRY SPREADS 16,616 46,138 178 96 210 128

India’s Dairy Exports – 2019 in Million US$

UAE 45SAUDI 11QATAR 8OMAN 7KUWAIT 6BAHRAIN 5

USA 15AFGH 13PAK 7

SING 11MALASIYA 8PHI 2THIA 5HK 3

NEP 15BHU 13BAN 40EGY 43

TURKEY 52MOR 8

AUS 7NZ 2

INDIA EXPORTS DAIRY PRODUCTS TO 105 COUNTRIES ACROSS THE WORLD

Opportunity : India

• 43% of the incremental milk produced in theworld from now till 2025 will be from India.

• Indian Milk production growing at better pacethan World

Opportunity : 2

• India is a competitive producer of milk in theworld

• Giving highest returns to the farmers

• India is located in the area surrounded by MilkDeficit region

Opportunity : 3• India is the largest producer of A2 milk in the

world.• Can divert more milk to processing–Loose to Processed / Packaged–Value added product

• Productivity enhancement program going on

The Road Ahead• Milk is the largest Agricultural Crop with promising returns to

farmers

• India growing at faster pace than global milk production

• Traceability is thru Integrated SAP software

• Clearance of India as dairy product supplier and approving EICas Dairy Export Monitoring body

• Explore cooperation between old friends -India and Russia

480, 86%

80, 14%

Year 2000

650, 78%

180, 22%

Year 2018

737, 69%

330, 31%Year 2033

World India

indian dairy industry: fta challenges

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