If you are a dairy farmer, milk collector, or processor in India, the past few years have likely felt like a slow squeeze — rising input costs, tighter margins, and growing uncertainty. While many factors are at play, two major global conflicts — the Russia-Ukraine war and instability in the Middle East — are significantly influencing dairy economics in India. These are not distant geopolitical issues; they directly impact cattle feed costs, milk prices, and processing expenses across the country.
The Chain Reaction: From Global Conflict to Dairy Farm
Wars disrupt agricultural supply chains. Russia and Ukraine together account for a large share of global wheat, maize, and barley exports — key ingredients in cattle feed. When exports were disrupted, global grain prices surged. India, connected to global commodity markets, experienced higher costs for feed manufacturing. Even locally produced feed became more expensive because domestic prices follow global benchmarks.
Fertilizer prices also rose sharply. Russia is a major fertilizer exporter, and disruptions increased global costs. Indian farmers growing fodder crops such as maize and sorghum saw their cultivation expenses rise. This meant even farmers sourcing feed locally were affected.
Additionally, sunflower oil imports were impacted. India depends heavily on Ukraine and Russia for crude sunflower oil, and by-products like sunflower meal are used in feed supplements. With supply tightening, prices increased, raising feed costs further.
Shipping and energy costs compounded the issue. Conflict-related disruptions in major trade routes increased freight rates and fuel costs. Higher diesel prices raised transportation expenses for feed, milk collection, and processing.
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Feed Costs: The Biggest Pressure Point
Feed and fodder account for roughly 60–70% of milk production costs in India. When feed becomes expensive, profitability declines rapidly. In recent years, cattle feed prices have risen significantly, forcing farmers to either reduce feeding levels or absorb losses. In some regions, fodder costs have nearly tripled, putting severe pressure on smallholder farmers.
This situation has created a ripple effect across the dairy value chain.
Impact on Dairy Farmers
Farmers are the first to feel the squeeze. When feed costs rise but milk prices lag, margins shrink. Many small farmers respond by selling cattle or delaying herd expansion. Others reduce feed quantity, which lowers milk yield and affects animal health. Reduced investment in herd growth creates future supply shortages.
Women, who form a large share of India’s dairy workforce, are disproportionately affected because they often operate smaller units with limited financial buffers.
Impact on Milk Collectors
Milk collectors — cooperatives and procurement agents — face rising procurement costs as farmers demand higher prices. At the same time, reduced herd sizes mean lower milk volumes. Collection routes become less viable when volumes fall below economic thresholds.
Logistics costs have also increased due to higher fuel prices. Quality challenges emerge when under-fed animals produce milk with lower fat and solids-not-fat content, affecting pricing and increasing disputes between farmers and collectors.
Impact on Dairy Processors
Processors face higher raw milk procurement costs and rising operational expenses. Energy, packaging, and logistics costs have all increased. Many dairies have raised retail prices, but consumer sensitivity limits how much can be passed on. This compresses margins.
To compensate, processors are shifting toward value-added products like paneer, cheese, butter, and yoghurt, which offer better margins. However, investment in processing infrastructure becomes essential to support this transition.
A Global Supply Gap Creates Opportunity
While conflicts increase costs, they also create opportunity. Ukraine’s dairy sector has been severely impacted, reducing global supply. As international dairy prices rise, importing countries are seeking reliable suppliers. India, the world’s largest milk producer, is well positioned to fill this gap.
India produces roughly a quarter of global milk but accounts for only a small share of exports. This imbalance represents a major growth opportunity. Export demand for products like mozzarella cheese and milk powders has already increased. Government initiatives and policy support are also encouraging export expansion.
However, to capitalize on this opportunity, India must strengthen cold-chain infrastructure, improve quality compliance, and increase processing capacity.
What Dairy Businesses Should Do Now
- Improve Feed Efficiency
When feed accounts for most costs, improving feed conversion efficiency is critical. Monitoring milk yield and composition helps optimize feeding practices and reduce wastage. - Protect Milk Quality at Collection
With supply volatility increasing, preserving milk quality is essential. Rapid cooling at the collection point reduces spoilage and maintains value. - Increase Local Processing
Processing milk closer to the source reduces transport costs and increases margins. Value-added products allow businesses to extract more revenue per litre. - Explore Export Markets
Demand is rising in regions like the Middle East, Africa, and Southeast Asia. Businesses that meet quality standards can benefit from higher global prices. - Leverage Government Schemes
Several government programs support infrastructure upgrades, productivity improvement, and dairy modernization. Accessing these schemes can reduce investment costs.
The Bottom Line
Global conflicts have created both challenges and opportunities for India’s dairy sector. Feed costs have risen, squeezing farmers, collectors, and processors. At the same time, reduced global supply has opened export opportunities. The businesses that invest in efficiency, technology, and quality will be best positioned to benefit.
For over 75 years, Chadha Sales Pvt Ltd has supported India’s dairy value chain with equipment and solutions that improve productivity and quality — from farm to processing plant. In today’s volatile global environment, efficiency is no longer optional; it is essential.
The dairy sector is changing. Those who adapt now will lead the next phase of growth.