At the close of last week, a regional government in India announced a €37.5m market support fund to subsidise the export of 60,000t of skimmed milk powder (SMP) on to the world market. This equates to a subsidy of €625/t for SMP exports coming out of India, allowing them to undercut the already weak global market for SMP.

The €37.5m market support fund announced by the government of Gujarat, a province in the west of India, is widely seen as a bailout package for India’s largest dairy co-op Amul. The farmer co-op has been losing money hand over fist with SMP prices on the floor. Amul’s cost of production for SMP is said to be €2,950/t, while the market price it has been receiving for SMP in 2018 has fallen below €1,700/t.

The announcement of this subsidy has sent SMP prices in Europe into retreat. Spot prices for SMP at the end of last week dropped €50/t back to €1,500/t, while futures markets are also in retreat, with September-delivered SMP falling to €1,475/t.