Input cost pressure – on increasing milk prices

Source: This post is created based on the article “Input cost pressure” published in Business Standard on 28th December 2022.

Syllabus Topic: GS Paper 3- Industries and industrial policies

News: The dairy sector in the National Capital Region of Delhi is experiencing difficulties due to a short supply and high cost of cattle feed and fodder.

Cattle feed prices have reportedly increased by 28%, leading to the highest level of wholesale price-based fodder inflation since 2013.

This short supply has resulted in multiple price increases for milk by major dairy companies. The main thing to note is that it is happening during a post-monsoon flush season. In this season milk supplies typically exceed demand, allowing dairy firms to build up stocks.

It has increased the milk procurement cost of dairies by 24%.

What are the reasons behind high cost of cattle feed?

Climate change: Intense heat and other climate change-induced stresses on feed-worthy farm produce

Alternative uses: The use of damaged and substandard grains for other products like ethanol and starch, instead of feeding them to cattle.

Shrinking natural pastures: Disappearance or shrinkage of natural pastures and common grazing grounds due to encroachment.

The area under cultivated fodder crops has remained stagnant at just around 4 per cent of the total cropland for decades. It is despite several fold increase in the cattle population.

Plant varieties: The replacement of traditional tall crop varieties with dwarf high-yielding ones has lowered the availability of plant stalks and other residual biomass for use as dry fodder.

What are the course of action?

Better management of grazing grounds.

Incentivising growing of nutritious forage grasses and trees under agro-pastoral and horti-pastoral systems of cultivation.

Setting up fodder banks to preserve the surplus green vegetation available during the monsoon season.

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