demand for milk grows in india

7/27/2019 Demand for Milk Grows in India

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MANAGERIAL ECONOMICS

ASSIGNMENTOF

FOOD INDUSTRYANALYSIS: DEMAND AND SUPPLY OF MILK ININDIA

PREPARED UNDER THE GUIDANCE OF DR.VEENA KESHAV PAILWAR

SHRIDHAR KAYAN

TUSHAR ROY

UTSAV DUBEY (2013311)

URVASHI ANAND

VARNIKA GOEL

VISHESH AGRWAL


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Demand for Milk grows in India Dairy industry News and happenings

In a recent study the demand for milk consumption is growing rapidly. The reason mainly is

attributed to the growing population, a health economy with increased incomes; the people

are consuming more milk products. According to the report the rise in demand will be around

compound rate of 4% over the next few years.

The demand is reflected both in rural and urban areas. There have always been a good

number of people that migrates from rural areas to urban cities. The way of living in cities

has even more pushed the demand for milk and dairy products. India is already one of the top

countries that produce milk. New are always introduced and incorporated. Still a large

number of produce is done via traditional methods.

According to a statistics has grown and India is a top country in milk production with 52%coming from Buffalo milk and remaining from Cows and a small amount from goats.

Dairy Farming in India

According to Assocham report milk production in India is likely to reach 190 million tonnes by 2015 and the annual turnover Rs.5 Lakh Cr. With planning commission targeting 4.5 to5% growth for Animal husbandry in the 12th plan and the World Bank funded 1584 cr

National Dairy plan in few months the sector is expected to witness a healthy growth in theyears to come. 17,300 cr National Dairy Plan by NDDB for the next 15 years. First phasewith 2000 cr investment to be launched soon

As one of the major source for livelihood in rural areas, animal husbandry derives primeimportance. To make animal husbandry/livestock sector more remunerative animalmanagement systems and production efficiencies need to be improved. Apart from

introducing new breeds of animals Government of AP plans to develop fodder nurseries, bund plantation, and perennial fodder crops and fodder conservation over next 4 years.

Though a profitable business venture dairy farming in India requires hard work, proper planning and an active and very alert managers and supervisors. We all have heard stories of how simple woman from towns have made big in dairy farming. In today's technologicalworld there have been many advances in modern dairy farming Everything from feed for dairy cows to milk processing equipment has added tremendous scope to the dairy farmingindustry.


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http://dairyshow.in/dairy-farming-in-india.html

Pitfalls Quality dairy animals are in short supply. Artificial insemination service for breeding

better cattle has limited coverage, barely reaching an estimated 10%of bovines Inability to feed cattle adequately throughout the year. Animal health cover is getting increasingly neglected. In many states, over 70% to

80% of the veterinary budget is used up for the staff salaries and transportation,weather the little left to buy medicines and other supplies

Limited investment in setting up or expansion of milk procurement network. Therapid expansion in milk processing capacities has not kept pace in production and

procurement. Poor infrastructure for transporting, processing and distribution milk produced in the

rural areas to major consumers centre in urban areas. The invisible partners in rural areas, women need access to training in modern cattle

management to maximize return. Timely credit is also needed for purchase of feed/fodder and health care and other inputs.
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A log (quintal) of green grass, quoted at Rs 600 three months earlier, has gone up to Rs 800.Experts say rains have disrupted its supply. The price of kapas khalli (cotton oilseed cake)has moved up by Rs 200 a quintal in the past three months, from Rs 1,600 a quintal to Rs1,800 a quintal. In addition, all grains used as animal feed have become costlier.

The price of milk generally moves along with that of diesel, albeit in lower proportion. In the past five months, diesel prices have risen seven per cent to around Rs 56 a litre from Rs 52 inMaharashtra. Transportation is a major component of overall cost.

GCMMF had raised milk prices by Rs 2 a litre in north India three months earlier but had notdone so in Gujarat. Delhi-based Mother Dairy raised its prices three months earlier in andaround the national capital but did not do so in western India. According to an official, the

price rise affected three months ago was automatically spread across the country.

Another popular local brand, Mahananda, which generally follows Amul and Mother Dairy,is awaiting a decision from its board. We have not taken a final decision. But we cannot ruleout a rise, as animal feed has become costlier, said a company official . With the rise, theBaroda District Co- operative Milk Producers Unio n has decided to pay an additional Rs 10 akg of fat, to Rs 465, to its 200,000 milk producers.

http://www.business-standard.com/article/markets/milk-prices-up-on-rising-input-cost-113070100723_1.html

Impact of high milk prices on consumer demand (elasticity of Demand)

Implications:

Consumers

An implication of the price of milk increasing in price and it being an inelastic good is thateven though consumers will be consuming fewer cows milk in relation to its higher price,

households will still be spending more in total. As milk is considered a necessity, consumerswill continue to buy cows milk and thus a higher percentage of the households disposableincome will be spent on purchasing cows milk. Therefore households in India will havesmaller disposable income to spend on other goods and services including luxury goods. Aconsequence of this could be a decrease of consumer spending in other parts of the economy.

With an increase in the price of cows milk, consumers are likely to switch to substitutegoods such as soy milk. This will result in an increase in the demand for soy milk and other substitute goods. However these substitute goods would not provide the same levels of calcium that cows milk does.
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With an increase in the price of milk, an implication of less cows milk being demanded isthat households will consume less milk. Although cows milk is an inelastic good, meaningthat households are not likely to change their demand for cows milk significantly, this is aforeseeable consequence of India consuming less milk. In the long term, this could put more

pressure on government spending on the health sector.PRODUCERS

An implication of less cows milk being demanded is that supply of cows milk from India producers will have to decrease in the domestic market. Therefore suppliers will either haveto cut down their production significantly or find another market overseas where demand ishigher. In order to allow most households in India to afford cows milk the Government mayhave to put a limit on the price of cows milk if it continues to increase a price ceiling. Thismight force firms to focus their resources and pr oduction to exporting cows milk. There is a

high global demand for cows milk in the international market and firms would be able tocharge prices that local consumers cannot afford. This would result in firms slashing their supplies to the domestic marke t. However if cows milk suppliers were increasing their exports of cows milk, their production (total output) would increase, which could lead to anincrease in total revenue. This will mean that they have a larger demand for their product andthis could lead to an increase in employment in India households, with the total disposableincome for households in India increasing. This could lead to consumers being able to affordto buy cows milk at higher prices so demand in the domestic market increasing. T he circular flow model is used to see these foreseeable consequences .

If the price of cows milk increases and more consumers switch to soy milk, this will result inan increase in the demand for soy milk. This will result in firms that produce soy milk increasing their supply to the domestic market. This could lead to an increase in output andthus an increase in the firms total revenue and profit. This can result in firms increasing their investment and employing more workers. This could result in higher household income levelsand thus a higher disposable income. However this could result negatively on soy milk

producers as with higher disposable incomes consumers will be able to afford to pay a higher price for cows milk and thus may switch their consumption back to cows milk and decreasetheir demand for soy milk.

Impact of high milk prices on milk production over time (elasticity of Supply)

Implications:

Producers

When there is an increase in price, producers increase their quantity supplied. This leads toincreased revenue for producers. This results in increased profit which can in turn lead to

increased investment and increased business confidence. With increased investment, firms


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are likely to expand their business and production output, meani ng supply of cows milk willincrease.

If the dairy boom continues, with high prices for milk, producers of other goods that use thesame resources to produce them may look at switching their production to cows milk. For example sheep farmers who are farming sheep for wool may decide to move their productionto cows milk as it is a more profitable good. Sheep farmers would use much the same capitaland raw materials in the production of wool so it would be likely that they will convert their resources to producing cows milk.

Consumers

If producers are supplying more cows milk at higher prices, receiving more revenue andtherefore increasing investment especially for human labour, there may be an increase inemployment. This will result in employment rates increasing and overall household incomewill increase. When there is an increase in quantity supplied there will be a resulting changein quantity demanded. At a higher price consumers are less likely to buy as much cows milk as at a higher price milk is less affordable. Therefore both the quantity supplied will increaseand the quantity demanded will decrease. This is shown by movements up the supply curveand the demand curve. This results in a surplus where the quantity supplied exceeds thequantity demanded and thus the market price is above the equilibrium price.

As a result of the excess supply of milk, there will be strong market pressure to reduce themarket price of cows milk as producers try to get rid of unsold stock. When the pricedecreases, there will then be a decrease in quantity supplied but an increase in quantitydemanded. This will continue until QS=QD, returning the market back to equilibrium.

demand for milk grows in india

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