While the effect of the COVID-19 pandemic was easy to see in April and May when producers were dumping milk down the drain, the long-term impact can be harder to suss out. To get to the bottom of the issue, we launched a survey in June to find out how dairy producers are dealing with the pandemic.
Of the 382 dairy producers surveyed, 73.3% of them said COVID-19 affected their farm moderately or severely. What might surprise you is 34.5% of the producers included in the survey said the pandemic either led them to leave the dairy business in 2020 (4.2%), to speed up their planned exit of the business (6.3%), or caused them to put any expansion plans on hold (24.1%).
In our modeling, economic growth has the biggest impact on long-run demand growth. And with the International Monetary Fund forecasting the worst global real GDP growth in decades, the models say “demand” is going to be pretty terrible.
For dairy products such as nonfat dry milk that the United States has to export , the risk is to the downside for prices. It’s possible that continued stimulus and/or direct purchases by the U.S. government may be able to keep prices for other products such as cheese from crashing down to global price levels, but I’m pretty bearish on prices across the dairy complex, given the scale of the global economic problems we’re facing.
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The government has been implementing various initiatives aimed at developing the dairy sector. Besides focussing on improving cattle productivity, measures are also being taken to strengthen rural milk procurement infrastructure as well as provide superior market linkages to the dairy farmers.
In pursuance of the recently-announced Atmanirbhar Bharat Abhiyan stimulus package for ensuring growth in several sectors, the government has approved setting up of Animal Husbandry Infrastructure Development Fund (AHIDF) worth Rs 15,000 crore.
With a thrust for better productivity, reduced input cost, and better quality milk and milk product, the competitiveness, and profitability in the Indian dairy sector will get enhanced, leading to improved demand for dairy products in the domestic and international market. It's also likely to fetch private investments in the sector to lift the growth in rural income as well as employment. The growing demand for different dairy products is expected to provide an opportunity for industry players to expand a range of value-added products.
Dairy industry: perspective & initiatives
Since last year, the novel coronavirus (COVID-19) pandemic from China has reached to worldwide with infecting more than 1 million people and has caused more than 50,000 deaths. This pandemic has also caused economic devastation. In spite of the shutdown of businesses, the social distancing, and other initiatives taken which are being taken by the governments to stop the spread of COVID-19, the dairy industry has persisted as one of the nation's critical industries in producing, processing, packaging, transporting, selling and serving fresh, nutritious and safe dairy products to the nation and the world.
From the wrath of COVID-19 across all industries, its impact has not remained unscathed in the dairy industry as well. Though milk production across the world has been rising, but the demand for dairy products has been varying across the various regions. Being one of the daily essentials, the demand in developing countries have been on a rise, while in the developed countries, a significant shift can be observed towards plant-based dairy products.