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India to milk advantage from curbs on New Zealand dairy products; Nearly 90% of China’s $1.9 billion in milk powder imports last year originated in New Zealand

India to milk advantage from curbs on New Zealand dairy products

5:39am EDT

By Rajendra Jadhav

MUMBAI (Reuters) – India, the world’s biggest milk producer, hopes to seize on a New Zealand dairy product contamination scare to increase its exports and add market share in China and other emerging Asian countries. India’s milk production is likely to rise almost 5 percent in the year to next March to 133 million tons, said R G Chandramogan, managing director of Hatsun Agro Products Ltd, one of the country’s leading milk powder exporters. Traditionally, most of that production stays at home as a protein staple for a population of 1.2 billion, but with domestic demand pegged at around 128 million tons, there should be more milk available to make skimmed milk powder (SMP) for export. The Indian government also usually restricts overseas sales to keep a lid on local prices.But, with more milk powder, a weaker rupee currency and Chinese restrictions on using some New Zealand products in the wake of Fonterra’s whey powder concentrate contamination scare, [ID:nL4N0G70HI] India expects its SMP exports to jump by more than half to 100,000 tons this year, said R.S. Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF), India’s top milk product exporter and owner of Amul, the nation’s best-known milk and dairy products brand.

Referring to New Zealand’s food safety issue, Sodhi said: “We don’t have such a problem. This is a very good opportunity for India. Definitely our exports will rise this year.”

Amul branded products won’t be appearing in Chinese supermarkets just yet – Indian supplies will go to milk product makers who then use their own packaging. GCMMF expects to ship 25,000 tons of SMP this year – five times last year’s levels.

“This year there is no (export) restriction and market conditions are better,” said Sodhi.

PEAK SEASON

Nearly 90 percent of China’s $1.9 billion in milk powder imports last year originated in New Zealand. India’s milk product exports are tiny in comparison – just $230 million last year, mainly to south Asian countries and the Middle East. India only felt comfortable enough with its domestic supplies to lift an SMP export ban in June 2012.

“We are heading towards the flush season, so there will be more milk available for SMP. We are getting good export orders for SMP,” said Vinayak Patil, chairman of the Maharashtra State Cooperative Milk Federation. August marks the start of a 2-3 month peak milk production season in some Indian states.

Rising export prices are also boosting sales, especially with the rupee’s weakness. The currency hit a record low of 61.80 to the dollar on Tuesday, and has lost a tenth of its value so far this year.

“SMP prices have risen more than 15 percent in six months in dollar terms,” said an official at a Delhi-based co-operative dairy. “With the rupee depreciation,” he added, “SMP exports are now lucrative for dairies.”

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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