Milk prices down by up to 15pc in Pakistan due to COVID-19 impact

LAHORE: In the initial phase of the pandemic, farm-gate milk prices decreased by 10 to 15 percent in the country due to impact of COVID-19 with dairy business still struggling to adapt to the new reality of lockdown – a phase which may continue for several months.

This was the conclusion of an online discussion among the representatives of dairy sector from around the world, focusing on the status of the industry, and the way in and out of the crisis. Dairy experts from 70 countries discussed the COVID-19 related dairy crisis during the two-day 21st International Farm Comparison Network (IFCN) Dairy Conference held virtually, which concluded the other day.

Dr Waseem Shaukat, general secretary, Corporate Dairy Farmers Association and Research Partner at IFCN Pakistan, said the third largest milk producing country in the world was hit hard due to outbreak of the infectious disease like many other countries.

“The biggest and immediate impact came on the pricing for the farmers. Farmers faced issues in selling milk and in many areas farmers were unable to sell the produce,” he added.

Farmers who supplied milk to formal dairy processors in the country did not face any price reductions, while farmers who sold milk to middlemen, faced issues in selling milk, which eventually became part of loose milk supply chain, as well as price reduction. “In the initial few weeks these farmers faced 10-15 percent reduction in the price of milk, besides collection refusal by middlemen,” he added.

With the onset of the epidemic in Pakistan in March, the milk supply chain faced quite a bit of interruptions as lockdown and resultant confusion lead to interruptions in milk supply chain and dairy farming inputs, including feed.

However, with active engagement between farmers and government agencies, necessary exemption was granted to the dairy sector, which helped in addressing challenges associated with transportation.

Lockdown impacted milk consumption on both domestic and industrial level, and a sharp decline was observed due to the imbalanced demand and supply. Ban on gatherings, marriage events, closure of hospitality industry, and diminished use of sweets, which consume a major chunk of industrial milk, also played a catalytic role, he observed.

Similarly, Dr Waseem added, closure of offices, shops and markets reduced milk consumption within offices for tea and coffee. With closure of restaurants, consumption of milk products like cheese in pizzas etc also reduced considerably.

Closure of tourism and hotel industry also resulted in a decline in milk consumption, especially in northern areas.

Pakistan dairy farming is mainly dominated by millions of small and medium scale dairy farmers nationwide who primarily sell their milk to middlemen. A smaller portion of dairy farmers sell their milk to formal dairy processors in the country. Approximately 4-5 percent of total milk production in Pakistan is collected by dairy processors while rest is sold in loose form.

Going forward, as things began settling, milk consumption slightly improved with the onset of Ramazan and partial easing of lockdown. Currently, we have entered into the lean season of milk production seasonality curve in Pakistan, where we have lesser milk production in summer season as part of the weather cycle.

He called this a blessing in disguise, as the phenomenon could help cope with suppressed demand due to COVID-19 for the time being. However, August onwards calving season starts and milk production would substantially increase as usual/. If market demand does not reach the same level by that time, it might have negative consequences on milk pricing and farmers’ profitability.

Talking about other challenges posing serious issues to the dairy sector, Dr Waseem blamed milk powder imports as the single cause of an under-developed dairy sector in Pakistan, especially during the last several years.

“The biggest possible fear factor for Pakistani dairy farmers is the potential jump in milk powder imports in Pakistan. That is where policy makers have to be vigilant,” he said, while urging the government to take steps to discourage powder imports to Pakistan in the coming weeks and months.

“Without this, the upcoming flush season can become a nightmare for the Pakistani dairy farmers,” he warned, while also asking to facilitate dairy farmers by lowering their input cost.

In the global perspective, Dr Torsten Hemme, Managing Director of IFCN said performance of the national farm gate milk price can be used as an indicator for a crisis. Elaborating a map describing the national milk price trends for 75 countries in May versus February 2020, he said, it seems that there is no major crisis yet as the milk prices on average declined by 4.6 percent globally.

Nevertheless, there are two large countries that could be considered as the “epicentre of the dairy crisis”: the US and India, with drops of 29 percent and 19 percent, respectively. The poll among the dairy experts revealed that one third considered their country to be only at the beginning of the crisis. But also, two thirds of the participants thought the bottom of the crisis has already been reached.

The outlook for the world milk price in 2020 remains complex, and future markets and the views of analysts are not aligned. As of early June, dairy future markets expect a fast milk price recovery to reach a level of $35/100kg milk in July, he observed.