Dearer milk: paying the price of smuggling

Lucky if you are lactose intolerant, not so lucky if you aren . After delaying the decision to increase milk prices on March 1, the dairy farmers inevitably announced the hike this week - raising the price of milk by Rs10/litre, a 17 percent sudden hike from the previous level.
And since milk is largely a deregulated, undocumented market, there will be no walkouts, ultimatums or deadlines from the political parties, so just be ready to pay the price.
A few critics would say the price hike is unjustified and a blow to the consumer. While the latter part is true as it undoubtedly will be a blow to the common mans pocket, the former part holds no water. The representatives of the dairy association cite a variety of reasons for the price hike - ranging from the increase in transportation cost, cattle feed ingredient to livestock smuggling.
The prices of fodder and other feed ingredients have risen sharply in the past few months leaving the dairy farmers with no other option but to pass on the cost to the consumer.
"The fodder price across the country has increased by 40-50 percent in the past three months and the government keeps on exporting fodder ingredients without taking stock of the local requirements which has forced us to raise milk prices", said Jameel Memon, Chairman, Sindh Dairy & Breeding Farm, while talking to BR Research.
The concerns are shared by other representatives as well as Haji Akhtar of the Karachi Dairy Farm Association also laments the governments role in encouraging smuggling of fodder and being a party to it by accepting huge kickbacks.
What is more disturbing is the nonstop export and smuggling of livestock which has been on the rise for the past three-four months. "The situation will get out of hand if they continue allowing export of animals and do not curb smuggling", said another member of one of the many associations representing the milk industry.
As a rough estimate, no less than 2,200 buffaloes are smuggled every day from Quetta, in which the government is allegedly involved in accepting bribes, according to Memon. There is a growing fear that this will result in a worse scenario come the summers, as the continuous exodus of milk yielding cattle will widen the demand-supply gap even further.
And yes, the milkmen see the prices going up even further citing Rs100/litre as a real possibility as early as June 2011. Yes, the situation is this grave if the smuggling of both fodder and livestock does not stop. The cost of a buffalo has nearly doubled in a short time as a buffalo that cost Rs 80,000 last year, now costs Rs 150,000.
The next increase may follow soon and that would not be a Rs10/litre hike - it will be much more as the retailers margins have been squeezed to Rs3-4/litre, nearly half when compared to the last year. The hike in open milk prices will also prompt the packaged milk sellers to raise the bar and maintain the premium of Rs10-12/litre - the packaged milk will definitely hit the Rs100/litre mark first.
The situation appears grim for the end consumers, as the dairy circles are also hinting to a mammoth rise in meat prices - which could double by the end of the fiscal year. Surely, milk at a Rs100/litre and mutton at Rs1000/kg will definitely move the inflation ticker northwards as dairy alone has a 6 percent weightage in the CPI index.
If the government does not intervene or the smuggling is not checked, the chances of both of which appear slim, then lemonade may be the preferred drink in the summer heat than a glass of lassi. Times ahead are tough indeed.