Dairy or Dare? Decoding India's Butter Exports in a World of Price Surges

"Balancing Act: India's Dairy Exports in a Changing Global Landscape"

Butter Export Overview

India's butter industry has witnessed a remarkable journey in the past four years, a journey punctuated by peaks and troughs that tell an intriguing tale of global trade dynamics. Over this period, India exported a staggering 46,000 tons of butter, amounting to a substantial $200 million in value. What's even more astounding is that 41% of this total was dispatched in the year 2022 alone, signifying a remarkable surge in demand. But the intrigue deepens when we explore the key destinations of India's butter—major Middle Eastern players like Bahrain, Egypt, Turkey, the UAE, and Saudi Arabia accounted for a whopping 75% of the total quantity. In 2022, India's butter export was a staggering 3.4 times that of the previous year, only to plummet by 58% in 2023. In this blog, we delve into this roller-coaster journey, dissecting the forces at play, and seeking answers to the pivotal question: why the sudden rise and fall in India's butter export, and what does it mean for the dairy industry's future?

YOY India's Butter Export Quantity (000) Matrix [2020-2023]

19963.4 (41% ) tonnes of butter of this total was dispatched in the year 2022 alone,

Middle East's Love for Indian Butter: A Market Insight

Saudi Arabia's remarkable increase in butter imports from India, a staggering 675% surge from 2020 to 2023, has ignited curiosity about potential dynamics in the Middle Eastern dairy market. Examining data from the Ministry of Economy of the UAE, it becomes evident that India holds the fifth position in dairy imports for the region. However, the majority of dairy imports into the UAE, and seemingly neighboring countries, are attributed to New Zealand and Saudi Arabia. This insight raises the intriguing question of whether Saudi Arabia might be serving as a conduit for the onward distribution of dairy products from India to the UAE and other Middle Eastern nations.

A staggering 675% surge in butter export

Top Countries of Dairy Imports in UAE (2022)

YOY Saudi Arabia's Butter Import from India Quantity (000) Matrix [2020-2023]

Meanwhile, Bahrain's unexpected import of 6,477 tonnes of butter in 2022, nearly twenty times the previous year's quantity, beckons further exploration. One potential rationale for this substantial import surge lies in an unconventional practice related to Special Economic Zones (SEZ) within Middle Eastern ports. Some countries in the Middle East have established SEZs to leverage economic benefits, including reduced import duties. As a result, it's conceivable that these SEZs require goods to first land within their ports, only to be subsequently forwarded to their intended destinations in neighboring nations. This scenario, influenced by GCC economies' pivotal shifts to reduce reliance on fossil fuel revenues and bolster their non-oil GDP, adds an extra layer of intrigue to the complex world of international dairy trade.

This intriguing puzzle poses an information disconnect for India, which is poised at the crossroads of an ever-evolving global dairy market. With this situation at hand, the bright side reveals itself as an opportunity for India to enhance its understanding of international trade dynamics. The forthcoming blog at anilmishra.org is poised to delve into the complexities of this phenomenon

Image Courtesy : PWC

Ports with special Economic zones in the Middle Eastern Countries

Notably, India's dairy exports have not only made waves in the Middle East but have also seen substantial number growth in other key markets. For instance, New Zealand witnessed a remarkable fourfold increase in its butter imports from India during both 2022 and 2023 compared to the previous two years. Even in the USA, there's a subtle uptick in India's dairy exports, with volumes climbing from 640 tonnes in 2020 and 2021 to 845 tonnes in 2022 and 2023. While these might appear as modest shifts, they underscore India's expanding influence in diverse global dairy markets.

Export Price Trends: Insights

The surge in demand for butter has sparked fervent speculation, with one undeniable factor coming into sharp focus – the astounding butter price hike experienced in Europe. This price surge reached astonishing heights, with butter commanding a staggering $8,000 per tonne, according to the renowned Global Dairy Trade Index (GDT) and the authoritative European Energy Exchange (EEX). Such an astronomical valuation sends ripples through the global dairy market, prompting both experts and enthusiasts to delve deeper into this perplexing phenomenon. In this blog, we assertively dissect this substantial price surge, exploring its implications, causative factors, and the far-reaching consequences it carries for international butter trade.

"Venturing into the world of international butter trade has brought forth some fascinating revelations. According to data from Tradestat Nepal, an average premium of $9,383 per tonne was paid for 331 tonnes of butter over the past four years. Now, while this could potentially raise eyebrows, it serves as either a data anomaly or a shimmering unexplored opportunity in the realm of butter exports.

Countries who imported Butter from India in 2020-2023

This journey of India's butter trade has not only been revealing but also inspiring. Over the years, we've witnessed a remarkable 36% inflation in butter prices when assessing our exports to various countries between 2020 and 2023. What's particularly uplifting is the progression in pricing – from $4,100 per tonne to $5,600.

Delving deeper into the numbers, we find that 55% of our butter exports were dispatched at an average price of $3,818, 26% at $5,249, and an impressive 4% commanded a premium price of $6,115. This showcases the incredible potential and growth in this sector, where higher quality and premium products are not just a possibility but a reality. So, as we continue our journey in the global butter trade, let's draw inspiration from this journey and uncover even more exciting opportunities ahead."

Unveiling Butter's Journey: Conclusion

As we ponder these revelations, we're left with a lingering question: has India over-exported butter, potentially impacting the supply-demand balance sheet, or have new opportunities sprouted within the country? This vibrant exploration serves as a testament to the evolving dynamics of the dairy ecosystem, where global demand resonates with milk price inflation and the demand for skim milk powder. The dairy landscape is evolving, and as it does, there's plenty more to uncover and explore.