Dodla Dairy says milk prices can go down if monsoons and LSD don't play spoilsport

Milk prices have been hiked by almost all major companies in India recently due to input costs going up, but the industry is entering the flush season, which will decide whether milk prices would come down.

The flush season in the milk industry usually refers to the period between September and March when production increases due to better fodder and water availability. The rest of the year is the lean period.

Dodla Dairy Managing Director Sunil Reddy Dodla told CNBC-TV18 that the flush season means milk prices going down in normal scenarios. "They may (come down), but not yet happening. Will normally give one month to see if there is not too much monsoon, no flooding, and those kinds of things that do have an impact. We must wait and see for 15-20 days," he said.

He said the flush season had just started, but if milk procurement prices don’t come down, we will compensate by increasing selling prices. The MD said growth came back with a vengeance in terms of people buying more dairy products despite the company going for price hikes.

“So, catching up on the procurement side did take some time. Now it has stabilised, but then we have issues like the lumpy skin disease (LSD),” he said.

While discussing the overall impact of the lumpy skin disease, he said, “South will be a little more protected because there is some kind of immunity there as the livestock was affected by lumpy skin disease a couple of years ago. Also, I think the disease is not hurting buffaloes much.”

He said the situation should be contained in another month or so because now vaccines have been made available by the government

Dodla Dairy has been buzzing in trade and is up over 10 percent already this month. The milk and milk products manufacturer posted an operationally weak set of quarter one earnings, with gross margin slipping 520 basis points (bps) year over year (YoY).

The company believes the pressure on the margin was predominantly due to raw material price hikes.

“It is a seasonal thing in the dairy industry that does happen often. So, milk availability was a bit weak in April, May and June being the summer months. Therefore, we had to pay higher prices for milk availability,” he said.