By Imesh RanasingheMilk powder importers warn of another milk powder shortage by January 2022, this time due to the unavailability of foreign exchange (forex) in banks, The Sunday Morning Business learns.Speaking to us, milk powder importers said that it is likely there will be a shortage of milk powder by January, as they are struggling to open letters of credit (LCs) to bring in their stock.An industry official said to us that currently, importers are supplying only 50% of the demand to the market due to the lack of stocks.“We are also requesting the banks to support us, but so far, it has been on and off,” he said.The official said that they hope the supply will normalise by the end of January 2022.It was revealed in Parliament last week that Sri Lanka has foreign reserves of $ 1.57 billion, which amounts to one month’s imports at levels prior to the pandemic.Although some of the milk powder importers also export products, their export proceeds are shared among the subsidiary companies for other imports, so their export proceedings are not enough to cover the milk powder imports.According to Global Dairy Trade, the price of one metric tonne (MT) of full cream milk powder had consistently increased since October 2021 from cost, insurance, and freight(CIF) $ 3,750 to CIF $ 4,008 by 7 December.Correspondingly, in October, the Government of Sri Lanka approved a price hike for milk powder importers, ending the artificial shortage created by the suppliers.Through the hike, 1 kg of milk powder was increased by Rs. 250 to Rs. 1,125, while the 400 g pack was increased by Rs. 100 to Rs. 480.It costs about $ 100,000 for milk powder importers to get one shipload, while they have a requirement of about $ 3-4 million a month.Another worrying factor for the importers is the shipping cost that has increased tremendously since the pandemic hit, as the 40 ft. container shipping rate which was at $ 2,000 is now at $ 9,000.“You can’t blame the Government for the increase of the milk powder prices and the shipping prices, as both are due to the world market prices. We only ask the Government to help us on the dollar issue,” an importer said.Sri Lanka consumes around 6,500 MT of milk powder monthly, while it spends an average of $ 360 million on milk powder imports.According to the Central Bank of Sri Lanka, about 97,000 MT out of the total milk product imports in 2020 were milk and milk cream, and according to the Department of Animal Production and Health, only 414 million litres of milk were produced locally last year.Moreover, milk products worth Rs. 53 billion were imported between January-September 2021, which is about an increase of Rs. 7 billion compared to the same period in 2020.
