Amul and Mother Dairy are ramping up production of butter to overcome a shortage by December.
“I believe that the availability will be completely normal at all locations in the next 10-15 days,” said R.S. Sodhi, managing director of Gujarat Co-operative Milk Marketing Federation (GCMMF), the owner of the Amul brand.
A Mother Dairy spokesperson said production has been ramped up and supplies will be normalised soon.
The availability of butter across the country was impacted by a fall in milk supply, along with exponential demand, starting in the peak July-October season. The milk shortage was triggered by the outbreak of lumpy skin disease in cattle, high fodder prices, and farmers leaving the dairy business, industry officials told Moneycontrol.
The impact of lumpy skin disease on cattle was especially grave. The disease drastically weakens the animal and adversely affects the quantity and quality of milk that they can produce.
Experts said lower milk production due to the disease and other factors impacted the organised sector’s milk procurement this year. Milk procurement fell 6 percent during July-October from levels a year earlier, according to some estimates. Consequently, major producers said they would focus first on stabilising milk supply rather than dairy products.
Butter supplies were also hit by exponential demand from the hotel, restaurant and catering (HoReCa) and household segments.
According to Pushan Sharma, director of research at CRISIL Market Intelligence and Analytics, the butter and ghee (clarified butter) market, which account for Rs 26,500 crore of India’s food market, started facing an acute shortage in September and peaked during the festive period (Diwali and Dussehra).
Poor yield
“Milk procurement during peak season of July-October was observed lower by 6-7 per cent on a year-on-year basis mainly because of poor milk yield on account of lumpy skin disease and higher fodder prices,” Sharma said. “As a result, the production of value-added products, especially butter and ghee, was affected, and Amul, which accounts for an 80 percent share in the total butter market, was out of stores in most states for around two-three weeks.”
In India, the monthly average butter consumption is at 500,000 tonnes.
“As per our interactions with market stakeholders, with control over the virus spread, milk procurement is likely to increase and thus one might see the butter shortage problem to get sorted by the end of the year,” Sharma said.
Notably, the availability of market leader Amul’s butter was felt by sellers.
“Typically, we receive a total of about 1,000 boxes (one box has 30 units) of 500 gm Amul butter per week at our facilities. However, due to low supply, we have only been receiving about 500 boxes,” a distributor of the company’s products in New Delhi told Moneycontrol on condition of anonymity. “We have been assured by the company that normal supply will be restored by the first week of December.”
“Our per-month demand is about three boxes of Amul butter. However, we have been receiving only half of this for the past 20 days or so,” said Inder Manocha, a store owner in south Delhi.
GCMMF said supplies are being restored to normal levels.
“There was a temporary shortfall in supply at some locations due to exponentially high demand coming in from the HoReCa segment, weddings, as well as households, which is up by almost 10-15 percent. We also witnessed panic buying,” Sodhi told Moneycontrol.
He said supply has normalised at various locations, including New Delhi.
“As of now, we have ramped up production. We are producing more than the average. Our sales for November will be far higher than in November 2021. As production increases, we are trying to build up the pipeline,” he said.
Tight supply
Sodhi emphasised that there was high demand for all dairy category products.
“Consumption has been steadily increasing as Covid’s impact declines. We had a massive demand surge even during Diwali season this year,” he said.
Additionally, Sodhi said supply will be tight for the next one year. However, he added that prices will be maintained in tandem with inflation.
“We will not destroy the future market by exorbitantly increasing prices,” Sodhi said.
Mother Dairy corroborated the trend.
“This festive season witnessed an outgrowing consumption of milk and milk products. As is the case for most of the categories, butter too saw a surge in demand from both the consumer and the institutional segments, leading to a temporary shortage in the market,” a Mother Dairy spokesperson told Moneycontrol.
India is the world’s largest milk producer with an annual output of 210 million tonnes. It has a cattle population of about 200 million.
Lumpy skin disease was first detected in the country in 2019 and a major outbreak occurring in July 2022. Currently, the Centre and state governments are striving to control the outbreak via vaccinations.
The disease has claimed the lives of over 60,000 animals, according to data for September, the latest that is available.
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