September 26, 2013
India's dairy sector: More milk for less beef?
Why making India's dairy industry not just productive but internationally competitive may involve the substitution of dairy exports in place of beef.
by Eric J. BROOKS
An eFeedLink Hot Topic
Self-sufficient in dairy but neither an importer nor exporter of note, India produces approximately 18% of the world's milk. This makes it the world's largest dairy producer, and is roughly equal to its proportion of the world's population.
Big, but not competitive
But India is also known for its cultural restrictions on meat consumption, tiny arable land area per person and exceptional status as the only large Asian country with a long history of dairy consumption. These factors imply the country should be producing and consuming much more than their current share of the world's milk supply.
Granted, this is starting to change. Recent years have seen both dairy production and incomes rise rapidly, such that dairy consumption's overall 6% annual increase is second only to that of broiler meat, with some milk by-product lines expanding by up to 8% annually.
Moreover, growing personal incomes is simultaneously fuelling 15% annual consumption increases for processed dairy products ranging from the cheeses used in fast food to ice creams, and dairy drinks to high-end western cheese and traditional yogurts. With refrigeration facilities required for the distribution of processed dairy spreading beyond major urban centres and the proportion of Indians with middle class incomes rising, there will be no let-up in the growth rate of processed dairy products for a decade or more.
Hence, despite output having grown 30% over the last five years, the problem is one of supply keeping pace with demand. At the turn of the decade, demand from processed dairy product makers saw India nearly run short of inputs such as skim milk powder, which only had its export ban lifted in the middle of last year. And this stressful relationship between supply and demand will persist for a few more years, as will growth in beef exports, with the two being curiously related.
This is because supply-side problems are endemic across India's dairy supply chain, starting with the cattle themselves. A top US dairy cow produces 10 tonnes of milk annually. According to the most recent USDA estimates, in exporters such as Canada, Australia and New Zealand, cows produce anywhere from 4 to 8 tonnes of milk yearly. Even China's troubled, scandal-burdened dairy industry uses cows that produce 4 tonnes of milk annually.
By comparison, the USDA's most recent Indian dairy products annual report notes that, "India follows a low-input/low-output' dairy production model characterized by [high] production costs and yields amongst the lowest in the world." It estimates that a typical Indian dairy cow's annual milk production amounts to produces 1.2 tonnes of milk. That is only 31% of the productivity of Chinese dairy cows, 20% of the milk an Australian cow makes and 12% of what a US cow would produce over that same year.Pitifully low as Indian dairy productivity numbers are, they actually are overly optimistic: this is only dairy cow productivity; the 60% of its milk which is derived from ruminants such as buffalo, sheep and goats have even lower output figures. When their production is factored in Indian annual production per dairy animal slips below 1 tonne. Indeed, if India's cow milk making productivity was just 60% of China's already low level, it could go from being nominally self-sufficient to being a world leading exporter.
But ruminant species and genetics are only one part of the paradigm which keeps Indian dairy productivity so low. In the use of high quality, professionally prepared feed ingredients, India's consolidating poultry sector has made some headway but that is not the case with dairy: According to the USDA, the average Indian dairy farmer only own five cows and is even more likely to use farm scraps than places like Indonesian and Vietnam, which have a reputation for doing so.Output is mostly accounted for by backyard farmers who alongside farm scraps use a hodge-podge of low quality alternative feed ingredients such as cereal by-products, neem tree cake, mango seed kernels, mahowa cake, soya pulp, wheat bran, pollard, broken rice, wheat germ and whey powder.
More milk, fewer cows, less beef
Of course, there are policies designed to deal with these shortcomings. Introduced in 2012, the country's latest five year plan featured a National Dairy Program (NDP), designed double milk output in the 15 years beginning from 2013, with average cumulative annual growth of 5% over this time.
This target is achievable but with India sustaining over a billion people with an arable land area comparable to that of Argentina, the plan seeks to boost efficiency rather than dairy cattle numbers. Subsidies for the introduction of western cattle breeds, western cattle genetics into native cow and buffalo herds, and the substitution of quality feed ingredients in place of traditional farm yard scraps.
To a certain extent, the most important part of this process has started: The proportion of milk accounted for by informal, backyard farms has fallen from 65% in the late 2000s to approximately 50% today. As large-scale, well capitalized farms start to account for a larger proportion of output, they will have the financial means to upgrade to better quality feeds and breeds.
And within five years, a critical point should be reached. With a combination of improved feed, cow genetics and production scale, milk production should start increasing for a decade or more amid a gradual decline in the numbers of dairy ruminants, particularly traditional buffalo. With fewer animals and more efficient feed conversion ratios, the achievable increases in dairy milk output should be achieved with disproportionately lower increases in dairy feed consumption.
Given India's cultural, religious and legal framework, this will limit the number of aging, non-productive dairy cows available for processing into beef and its exports of that protein line. On the other hand, the resulting rise in productivity and fall in unit costs could take India beyond dairy self-sufficiency and make it a leading exporter, particularly to the neighboring Middle Eastern and North African (MENA) countries.
Hence, the question becomes one of, 'does India want to have a world class dairy industry, or does it want to keep exporting beef?'
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