India: Milk’s new horizon

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A new study reports that the demand for milk in India will rise by a compound annual growth rate of about 4 percent over the next few years (RNCOS, 2012). Research shows that as incomes increase consumption of animal products, specifically milk and dairy products, intensifies (Wenge Fu et al., 2012). In fact, India’s upturn in demand for dairy products far outweighs the growth in demand for animal products such as meat and eggs.

India owes this large demand for milk to its largely vegetarian population. Dairy product demand in India has increased dramatically in both rural and urban sectors. However, as a larger population is emigrating from rural areas to cities an even greater demand may be placed on dairy products. Between 1980 and 2010, India’s level of urbanization increased from 23 to 30 percent of the population.

The second largest country in the world, India is projected to grow from 1.2 billion people in 2010 to just under 1.7 billion by 2050 with 55 percent of that population being urban. This increase in buying power allows consumers to purchase durable goods such as refrigerators that enable larger consumption of dairy products than ever before. Moreover, a more urban population also offers the increased opportunity for cultural exchange, leading to increased consumption of meat and dairy products not only in India but across Asia. All of these factors coupled together lead to growing international market opportunities for milk and dairy products in India previously unnoticed in the global dairy industry.

India is the world’s largest producer of milk. However, the majority of that milk is buffalo, followed by cow and goat milk as shown in Table 1 (FAOSTAT, 2013). Since 2005, 53 percent of the fluid milk produced in India has come from buffalo, 43 percent from cows and 4 percent from goats. In 2011, India produced 34 percent more milk than the U.S. up from 19 percent more in 2005 (Table 2). For dairy cow production, the United States produced 70 percent more milk in 2011 than India.

One study by the OECD-FAO in 2011 suggests that India will have sufficient production to meet demand for milk and its products (excluding butter) through 2020. Nevertheless, as Wenge Fu et al. note, the rapid increase in population and changes in consumption patterns make such estimations difficult. Fluid milk demand is projected to grow at 10.2 percent per year, while production is projected to grow by 3.7 percent based on 1994 to 2004 growth rates. Competition for land to produce grains and feed products for animal production may limit agricultural growth in all sectors. This pressure on natural resources and its effect on production could lead to a greater reliance on imported dairy products.

In the short run, India’s dairy sector is well positioned to accommodate the rapid growth in dairy product consumption. An increasingly urbanized population with a greater disposable income will drive demand leading to opportunities from the global milk market to supply this new generation of Indian consumers.

Table 1. India’s Milk Production by Species from 2005 to 2011 in Tonnes (FAOSTAT, 2013)

Year Item 2005 2006 2007 2008 2009 2010 2011 Avg
Buffalo Milk (whole, fresh) Production in Tonnes 52,070,000 54,382,000 56,630,000 57,132,000 59,201,000 62,350,000 62,350,000
% of total production 54% 55% 54% 53% 53% 53% 52% 53%
Cow Milk (whole, fresh) Production in Tonnes 39,759,000 41,148,000 44,601,000 47,006,000 47,825,000 49,960,000 52,500,000
% of total production 42% 41% 42% 43% 43% 43% 44% 43%
Goat Milk (whole, fresh) Production in Tonnes 3,790,000 3,818,000 4,481,000 4,478,000 4,467,000 4,594,000 4,594,000
% of total production 4% 4% 4% 4% 4% 4% 4% 4%
Total Production in Tonnes 95,619,000 99,348,000 105,712,000 108,616,000 111,493,000 116,904,000 119,444,000

Table 2. Milk Production in India and the United States from 2005 to 2011 (FAOSTAT, 2013)

Year Country 2005 2006 2007 2008 2009 2010 2011
All Milk Production in Tonnes India 95,619,000 99,348,000 105,712,000 108,616,000 111,493,000 116,904,000 119,444,000
USA 80,254,500 82,463,000 84,189,100 86,177,400 85,880,500 87,474,400 89,015,200
% Difference between India and U.S. 19% 20% 26% 26% 30% 34% 34%
Cow Milk Production in Tonnes India 39,759,000 41,148,000 44,601,000 47,006,000 47,825,000 49,960,000 52,500,000
USA 80,254,500 82,463,000 84,189,100 86,177,400 85,880,500 87,474,400 89,015,200
% Difference between U.S. and India 102% 100% 89% 83% 80% 75% 70%

Sources

FAO-STAT. June 4, 2013. http://faostat.fao.org.

OECD- FAO. 2011. Stat extracts country statistical profiles. http://stats.oecd.org/index.aspx.

RNCOS. 2012. Indian dairy industry analysis.

Stassopoulos, T. 2013. Guest post: how fridges will transform India’s milk market- and change lives. http://blogs.ft.com/beyond-brics/2013/04/23/guest-post-how-the-fridge-will-transform-indias-milk-market-and-change-lives.

Wenge Fu, et al. 2012. Rising consumption of animal products in China and India: National and global implications. China & World Economy. 20(3):88-106.


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