Unpacking India's Dairy Crisis
Bovine economy has been the oldest circular economy in this part of the world. What happens when Climate Change unleashes havoc on the country with arguably the best livestock model in the world?
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Peeling the Layers of India’s Dairy Crisis
How did the world’s largest milk producer (221.06 Million Tonnes in 2022 (Source)), with arguably the best livestock model in the world end up in a supply crisis, fueled by soaring milk prices?
Unpacking this question has a strange onion-peeling effect. At first, your eyes find it hard to tolerate them. However, if you bravely peel further, you will be amazed at what you find- a real-time case study of how systems in agriculture respond when they become victims of their success and wake up to the hard realities of Climate Change.
Shall we peel the onion and its layers?
Layer 1: Milk Export
Historically, demand for milk has been inelastic as it is an essential item and people used to buy mostly the same quantity. Over the past few decades, this has been rapidly changing due to globalizing consumer preferences. In the case of India, the demand is highly elastic as the excess supply during the flush season (October-March) is converted into skim milk powder and butter fat so that it can be reconstituted back into milk during the lean months (April-September). No other commodity has this privilege, if you think about it:)
Most experts have concurred that the rising demand for fat which fueled dairy exports has led to a spike in milk prices.
“Demand is growing for ghee, ice-cream, khoa, paneer, cheese, and other high-fat milk products. But supply is coming more from crossbreds that give low-fat milk. The mismatch is pushing fat prices higher.” - RS Sodhi, President of Indian Dairy Association.
“The export of dairy products grew 19.45% to $471 million in April-December 2022 from $395 million in the corresponding months of the previous year.” - Jordbrukare Analysis
As per Jordbrukare, ‘export of fat items, such as ghee, saw an unusual jump of 40%, as global demand soared’. '
Even when you contrast this with the IIP data, it is evident that there has been a domestic decline in fat products such as butter and ghee.
Here is the discomforting part of peeling the onion.
When I teach Systems Thinking in Agriculture 101, this will be one of the modules that I will cover.
Agriculture is a fascinating multi-dimensional, multi-agent domain that penalizes you for one-dimensional success (milk production in this case) and you end up being trapped in a perverse game of incentives.
Did the surge in dairy exports adversely affect domestic prices, thereby affecting the livelihoods of small and marginal farmers who were reeling from the aftermath of lumpy skin disease and raising fodder prices? As there is no MSP for livestock in this country, farmers face market volatility head-on.
(Which opens up a window of agritech possibility for dairy-centred vertical agritech startups like DGV to leverage the infrastructural gap in dairy financing)
Likewise, what has been the unintended consequences of Operation Flood is a subject that is rarely talked about, given how much AMUL and Operation Flood is highly revered in this country rightfully so for its scale of impact. Did Operation Flood trade-off the diversity of indigenous cows which comes with low-yield and low feed prices?
Because Operation Flood relied on a network of village cooperatives, government data is biased towards milk production data from the cooperative sector and doesn’t take into account the data from private players. And so we have no way to clearly ascertain production data and see the supply-demand trends.
Few weeks back, the Bangalore Milk Union president candidly admitted that “many small milk producers have given up on rearing cows as it has become unsustainable”.
Historically, since farmers receive agricultural incomes only twice a year during their Kharif and Rabi cropping seasons, whenever small-holding farmers wanted short-term cash flows to manage everyday expenses, it was the income from selling milk that they relied on. To put it in technical terms, unlike other countries, Indian farmers practise ‘agro-silvo-pastoralism’ - land for crops and trees as well as for livestock.
Why has rearing cows now become an unsustainable activity?
Let’s peel the onion further.
Layer 2: Lumpy Skin Disease
As per official sources, more than 2 million cows were affected by the viral lumpy skin disease (LSD), although the real numbers may be much more.
The problem was further compounded by the fact that there has been a shortage of vets in rural India and the veterinary infrastructure is abysmal to tackle the LSD pandemic that affected almost half of the cows in rural India.
(This infrastructural gap is a window of agritech opportunity for AI-based diagnostics and other innovations)
How did Climate Change contribute to the spread of the LSD pandemic?
With unseasonal rains, vets have pointed out how ‘increased moisture’ has contributed to the spread of the disease vectors.
In Open Veterinary Journal 2020, researchers from Bangladesh summarized the impact of Climate Change on Livestock in a smallholding context thus:
“With more frequent extreme weather events including increased temperatures, livestock health is greatly affected by resulting heat stress, metabolic disorder, oxidative stress, and immune suppression, resulting in an increased propensity for disease incidence and death. The indirect health effects relate to the multiplication and distribution of parasites, reproduction, virulence, and transmission of infectious pathogens and/or their vectors.”
Layer 3: Fodder Prices
The impact of Climate Change on livestock is further accentuated when you examine the third layer of fodder prices.
What are the second-order effects of climate change affecting the wheat output of the country and unprecedented rains? Fodder prices shoot up as there is a shortage of dry wheat husk/stem. Ironically in the state of Punjab, despite the fodder prices raise, farmers continued to burn the stubble as the labour cost for hand-harvested wheat, which increases fodder while reducing stubble, is prohibitively expensive.
“Straw is the major source of fodder for livestock in India. A buffalo giving 10 litres of milk needs an average of 30 kg of fodder a day. This should consist of four kg of grain, 4-5 kg of straw and the rest of green fodder. But in the absence of green fodder, farmers become dependent on straw.” - Putaan Singh, scientist at Indian Insitute of veterinary research, Palampur
Over the past year, a shortage of feed and fodder for livestock coupled with the diversion of straw in other industries (such as paper) has led to increasing fodder prices.
States imposed a ban on transporting fodder and farmers were forced to address some of the root issues that involved reviving village commons.
From a data perspective, when there are no reliable estimates of livestock in this country, to expect a reliable estimate of fodder is a pipedream. As per Indian Grassland and Fodder Research Institute, India is facing a shortfall of 11.24% in green fodder, while another study points out that India is facing a shortfall of 35.6%.
Layer 4: India’s Drying Up Animal Number Dividend.
What makes India arguably the best livestock model in the world?
When you study the number of cereal crops allocated directly to human food; used as animal feed; and allocated to other uses (predominantly industrial uses such as biofuel production), the picture you get is fascinating.
This was possible because historically, draught animals were used as an energy source. In a famous study conducted by NS Ramaswamy in 1982, he wrote
“The work performed annually by these draught animals would require 20 million tonnes of petroleum, valued at US$6 billion, if it were performed by motorised vehicles.”
Of course, mechanisation happened and farmers continued to rely on cattle for milk and fixed income. Currently, India is at crossroads, as thanks to the LSD pandemic and raising fodder prices, India is facing a drying up animal number dividend.
Much before the LSD pandemic, as per the Livestock Census 2019, the numbers were clearly pointing out that it was goats and sheep that were driving the livestock increase rather than the cattle.
What this means is that if India has to maintain its leadership in milk production, it will have to depend on increasing productivity and enhanced yield. Of course, it is possible to reverse this trajectory if we pay sufficient attention to the pastoralist traditions of the country.
Globally speaking, Climate Change affects the livestock industry in two ways
Heat stress affects the ‘thermal comfort zone which is beneficial to their physiological functions.’
Going by what happened in Australia, there is a high possibility that India is facing a similar tipping point in its dairy production in 2023 similar to what Australia faced during the 1980s when its dairy herd reduced considerably and milk yield began to increase, powered by infrastructural push in the dairy processing sector.
This crisis is a great opportunity for the Indian agritech ecosystem which is currently largely centred around increasing the protein content of the feed given to cattle. The rise of startups like eFeed, Occamy, Cattleguru is a testament to this.
Extreme weather events will increase the possibility of viral outbreaks like Lumpy Skin Disease in the future.
A 2020 ILRI report suggested that out of 65 animal diseases that can break the lives of farmers dependent on livestock, 58 per cent are climate sensitive. As per the 2021 Parliamentary Panel on the status of veterinary services in the country, there were only ‘256 state laboratories, 56 veterinary colleges laboratories, 33 ELISA laboratories, five regional and one central disease diagnostic laboratories.’ in the country.
This is a great opportunity for agritech ecosystem to fill in the infrastructural gap in livestock health infrastructure.
Of course, I haven’t talked about methane in a livestock context and the larger positioning narrative going in agritech to link productivity with methane reduction. There is a lot to unpack in this. We will explore this in further editions.
Would India chart the path taken by Australia during the 1980s or would India chart its own idiosyncratic climate-resilient dairy success story that leverages its rich pastoralist tradition? It could be a bit of both. Time will tell. Let’s see:)
So, what do you think?
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