India is the world’s largest producer of milk, accounting for 18.5 percent of global supply, or about 400 million liters a day in 2014-15. The industry is growing at a CAGR of 15-16 percent, of which the formal milk economy is worth approximately USD 12 billion. Milk value-added products, like cheese and ice cream, see high profits, with EBITDAs ranging between 25 and 40 percent.
These figures and the fast-rising demand for milk and dairy products in India present attractive opportunities for cooperatives and businesses in India, but rising temperatures pose a lot of challenges. Maitree Fresh, a small producers’ company of female dairy farmers in Tonk, Rajasthan, faces lower yield because of heat stress among buffalo and cows as well as rising and more volatile input costs (for feed, fuel, electricity, and shelf-life extension).
Indian Milk Production 101
India’s milk production ecosystem is unique in the world, 55 percent dominated by cooperatives that have wide and complex milk sourcing schemes from millions of small farmers. Typical dairy businesses source small-farmer milk through a massive network of milk collection centers (MCCs), where milk is collected once or twice daily from local farmers, stored in chilling units, and then transported to processing plants for pasteurization and conversion to raw bulk, powder, or other value-added products like cream, ghee, cheese, and yogurt. Success depends heavily on the ability to streamline logistics (collection and transportation times and routes) in order to manage short shelf life and quality variability. Major seasonality in prices and production are also major challenges faced by the dairy industry, which provides secondary income to millions of small farmers.
Actions and Opportunities for Climate Change Response
Businesses like Maitree Fresh are trying to insulate themselves by increasing milk shelf life through improved pasteurization and storage logistics and by diversifying into longer shelf-life value-added dairy products like ghee and cheese. This helps to buffer against the increasing challenges of maintaining shelf-life in light of rising temperatures, and it also helps to step into higher-margin products and more diversified revenue streams. Businesses also insulate through long-term livestock feed procurement.
But this leaves them exposed to anticipated falls in animal milk yield and anticipated rises and volatility in most input costs. They’re going to need to look at many more solutions, including improved and diversified animal breeding and sourcing, improved animal care, insurance, and perhaps hedging with production of countercyclical commodities like organic manure. Strengthened breeding will prove a major challenge in light of anticipated shortages in high-quality livestock, and perhaps government will play a role here. Sourcing from both cows and buffalos can help because the animals have opposite production trends across the year. Moreover, increased veterinary care has been found to make huge differences in yield, as many small farmers go without (Stutilina, 2010).
 Considering cow and buffalo milk
 Press Release: 26 February 2016. Press Information Bureau. Ministry of Finance. Government of India. Accessed 3 November 2016. http://pib.nic.in/newsite/PrintRelease.aspx?relid=136849
 Shashidhar, Anita. “The Rs 80,000 crore milk business.” Business Today. Accessed 29 July 2016. www.businesstoday.in/magazine/cover-story/indian-dairy-market-is-on-a-tear-due-to-new-players/story/232545.html
 Stutilina, P. and Debasish Pradhan. Case Study: The Establishment Of Maitree, A Producers’ Company Of Women. SRIJAN.
 Sreenivasaiah, K. 2016. “Climate Change and Its Impact on Milk Production in India.” Climate Change Challenge (3C) and Social-Economic-Ecological Interface-Building, pp.531-547.
 “New chilling unit to augment milk supply.” The Hindu. Accessed 10 October 2007. www.thehindu.com/todays-paper/tp-national/tp-otherstates/new-chilling-unit-to-augment-milk-supply/article1926969.ece
Images Source: Ajita Shashidhar (www.business today.in)