ICICI Securities: Dairy Firms To Defer Hikes Due To Lower Milk Procurement Prices
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ICICI Securities Report
Wholesale milk prices declined 0.2% in August 2020 (first month on month decline after December 2019) due to-
1) lower milk procurement prices, 2) Higher skim milk power (SMP) inventory in India and lower global SMP prices and (3) beginning of flush season.
Milk procurement prices continue to decline with lower demand from hotel restaurant and cafe, Value added products and commencement of flush season.
Dairy companies were supposed to raise prices in H1 FY21 but we expect them to further defer the price hike considering lower procurement prices.
We also believe there is possibility of subsidy announcement by Government to arrest the decline in milk procurement prices.
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