Export subsidies for Indian skimmed milk powder - world market prices under pressure

A huge milk surplus in India could put pressure on the world market price for milk powder after the Indian government subsidizes milk production to supplement the income of the rural population. Exports of milk powder (Skimmed Milk Powder = SMP) will increase 9-fold this marketing year.
Indian exports of SMP will rise to 100,000 tonnes in the 2018/19 marketing year, as government incentives make the prices of dairy products competitive on the world market. Such a large supply on the world market will put pressure on SMP prices, which have halved over the past four years.
Exports should help to reduce Indian stocks. Low milk prices below production costs have sparked nationwide protests from farmers. Thus, the government was forced to subsidize the exports of dairy products.
So far, India has not exported large volumes of dairy products, but that will change over the coming months, according to the subcontinent's largest milk processor, Gujarat Cooperative Milk Marketing Federation Ltd.
In this marketing year, which began on April 1, India would become 100.000 tons of SMP. Last year it was only 11,500 tons. So far, the USDA has assumed that this year, too, SMP will no longer reach India from India.
However, such a large amount of additional SMP will affect the world market price. The world market is usually served by SMP from New Zealand (410,000 tons / year) and the USA (720,000 tons / year). For quality reasons, Indian milk powder always has a discount.
Text: HANSA Derivatives Trading GmbH /

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