Grappled with supply crunch, powdered milk prices soar

Prices of imported powdered milk have almost doubled in the last six to seven months, thanks to supply shocks in the international market by the Russia-Ukraine war and a dollar crisis in Bangladesh.    

The dollar dearth has left Bangladeshi importers unable to open the letter of credit (LC), sending the local market to severe volatility despite the global market having returned to normalcy.  

Milk price that was Tk500-550 a year ago has now reached Tk900-950 per kilogram. Condensed milk prices have also skyrocketed to Tk100 per can from the previous Tk60. The price spirals compel the consumers, whose income in comparison did not increase much, either to skimp on the items or to rush for cheaper alternatives.

Our market data shows that overall consumption has dropped by 15%-20%. Households that used to buy a big packet are now buying smaller packs of powdered milk, while many have given up. Besides, sweetmeat shops have reduced the use of powdered milk.

Our market data shows that overall consumption has dropped by 15%-20%. Households that used to buy a big packet are now buying smaller packs of powdered milk, while many have given up. Besides, sweetmeat shops have reduced the use of powdered milk.

Also, the use of condensed milk has decreased on the back of slumping sales at small tea stalls. Roadside shops, the key buyer of condensed milk, had to raise tea prices to Tk10 per cup from Tk5 due mostly to pricier sugar and milk — forcing many to reduce tea consumption.

Pricier sugar edged up condensed milk prices. A kilogram of sugar which used to cost Tk70-80 has now reached Tk115. Besides, production costs are on a gradual rise due to the increase in gas and power tariffs. On top of it, an increase in tin can prices has also impacted condensed milk rates.   

While the annual condensed milk sales were 6 lakh cartons (48 pieces per carton), it dropped to 4-4.5 lakh cartons last year. We also had to make business cost adjustments, such as reducing advertising costs.

Like us, liquid milk processors are also facing a squeeze owing to power and energy tariff hikes, pricier cattle feed and higher costs of milk buying from farmers eventually. In the face of escalated production costs, they had to increase liquid milk prices too.

There is a relationship between powdered milk and the liquid milk market. If powdered milk sales plummet, liquid milk sales jump. This is what is happening now.     

Besides, the consumption of liquid milk increases by 70%-80% during Ramadan, which poses a significant challenge to the overall local milk supply. Because packaging used by both the powdered and liquid milk sectors largely depends on imported materials. Import bumps to the packaging segment spell challenge both to milk processors and powdered milk manufacturers.      

According to the Infant and Young Children Nutrition Association of Bangladesh, the country's demand for formula milk and powdered milk is around 14,000 tonnes a year.

Therefore, there are no alternatives to ease the import of powdered milk and raw materials for packaging. The import issues should be settled promptly. 

The author is the head of business at Partex Star Group