The world milk production in 2008 is estimated at 684 million tonnes, 2.1 per cent or 13.9 million tonnes more than in 2007. Out of this, cow milk will account for 576 million tonnes. Milk production is now expected to rise by only 3 per cent in Asia. The production in India is estimated at 104 million tonnes. Pakistan looks set to increase production by 6 per cent in both 2008 and 2009 as high internal prices have stimulated investment in the sector. South America will again be fastest growing milk producing region. Argentina's milk production is expected to grow by 5 per cent. Brazil may have growth by 8 per cent, Uruguay is expected to increase its production by 1.2 per cent while Mexico, one of the world's largest importer of milk powder will show limited gains given high feed cost.

Milk production in Africa is anticipated to advance by one per cent showing weaker supply response to the prices. South Africa and Algeria should however, display continued response to higher prices and grow by almost 3 per cent. In Kenya, where milk production and distribution was down sharply during the social unrest early in the year, growth has regained momentum and the production in 2008 should reach the level obtained in 2007.

In the US, milk production decreased slightly in 2007 but recovered rapidly in 2008. In European Union, milk production increased by 1 to 2 per cent growth. Production in Belarus is continuously growing while the growth rate in Russia has been more modest. In Oceania a recovery in production is now evident as more favourable weather has been experienced since the start of 2008-09. In United States, dairy sector has responded significantly to attractive internal and external prices in the last two years. In Canada, higher feed cost has limited domestic market growth.

The world wide production of buffalo milk is estimated at 83 million tonnes constituting around 13 per cent of the total world milk production. It increased on an average by more than 3 per cent annually during the last ten years. Almost 90 per cent of the total volume is produced in India and Pakistan.

The production of milk powders would increase significantly, while in 2007 more whole milk powder was produced, in 2008 an increase of skimmed milk powder production is expected. A total production of 4.2 million tonnes of whole milk and skim milk powder is expected. In the first half of 2008, the production of EU was boosted by strong export commitments, and relatively high prices. The production in Oceania was lower following the unfavourable weather conditions. Over this decade, the United States increased the production by 40 per cent or 2,00,000 tonnes, while Argentina and Brazil have nearly doubled their production. India continues to show an impressive growth in the SMP production.

Global exports of key milk products, in milk equivalent terms, may reach 40.4 million tonnes in 2008, up almost 3 per cent from the previous year. The turnaround in rate is largely due to strong increases in exports from United States which has grown by over 50 per cent, to 4.5 million tonnes. Deliveries from South American countries may rise by 9 per cent to 2.9 million tonnes led by Brazil and Argentina. Exports from European Union are anticipated to decline but the drop is likely to be more limited. The exports from Asian countries are forecast to fall on account of China which has been barred access to trade partners market following the melamine contamination incident. However, prospects for a slow down of world economic growth are adding considerable uncertainty to the present outlook.

Skim milk powder exports are expected to rise to 1.263 million tonnes, 10 per cent higher than the previous year, particularly due to increased export from United States which would be at record 400,000 tonnes. Exports from New Zealand, Australia and European Union are anticipated to decline marginally. Imports to both African and Asian countries are expected to increase, stimulated by much lower prices.

Global exports of whole milk powder are expected to rise as global milk supplies expand. Whole milk powder remains the key milk product exported by surplus milk producing regions to growing developing countries market. New Zealand, the largest whole milk powder exporter, is set to increase sales both in 2008 and 2009. But the largest increases will come from the European Union as its milk production increases.

The high milk prices for dairy products in 2007 have reduced the demand from international markets temporarily. Dairy products might even have lost market share in the long term. Moreover, the less favourable situation of economies worldwide will have some impact on demand of dairy and other high value food items. However, countries benefitting from the high prices of mineral oil, natural gas and other raw materials are still in a favourable position which enables them to develop strong demand and the reduced price level of dairy products will also help to bring the world dairy trade back to the path of growth.

The exports of dairy products from India have shown an impressive growth during the past few years. India exported over 42,000 tonnes valued at Rs. 358.69 crores during 2004-05, which increased to 59,746 tonnes valued at Rs. 552.27 crores during 2005-06 and the exports during 2006-07 were 37,391 tonnes valued at Rs. 395.15 crores. During 2007-08, there was ban on exports of SMP for about 6 months, but on account of high prices in the international market, the India's exports of dairy products were at Rs. 960.2 crores. The ban on SMP export to some extent was compensated by high prices of casein.

On account of world wide recession and decrease in the global demand milk powder prices have come down dramatically in just one year. The prices are expected to fall further. While the export prices for SMP had gone as high as US $ 3500 per tonne, it has come down to less than US$ 1900 per tonne. Similarly, the prices of casein have crashed from US$ 9500 to US$ 5000 per tonne. Market sources forecast milk powder prices may further go down.

The major dairy plants in the country have got huge stocks of SMP. The flush season has already set in and these stocks are not required for recombination. A panic situation is developing in the dairy sector with a fear that the processing plants may start refusing milk from the producers.

Large quantity of oil cakes are being exported. Consequently, the price of groundnut cake, soya extraction, rapeseed extraction and sunflower extraction has increased by 60 to 66 per cent in the last one year. This has resulted in the increased cost of feeding and maintenance of milch cattle resulting in increased cost of production. According to IDF, the farmers in India get paid lowest price for their produce in the world. There is already developing a situation of crisis and dairy farmers find it more profitable to sell off buffaloes for slaughter since export of meat is fetching good price and the government of India is giving large incentives on its export.

The 11th Five Year Plan (2007-2012) focuses on faster and more inclusive growth of the economy. The goal for agricultural sector as a whole is a growth rate of about 4 per cent and for the dairy sector, a growth rate of about 5 per cent in milk production. The dairying has been identified as an important component for diversification for the agricultural sector. In the light of global recession and fall in the prices of dairy products it may not be possible for the dairy sector to achieve the objectives of 5 per cent growth.

Economic recession is giving sleepless nights to economists, governments and people all over the world. Recession and boom are not uncommon but the world over recession definitely makes it an alarming feature. Is this phenomenon the result of economic liberalization or is it due to some major miscalculation on the part of economic wizards, it is not known as yet. However, one wonders that in the age of computers and space research, where one can calculate to the minutest fraction, how come economists of the world and financial giants failed to predict a major financial mismanagement?

Wishing a very Happy New Year!