Share prices of dairy product makers have plunged by as much as 10 percent on Wednesday after some of them rising over 13 percent on Tuesday.
On Tuesday, this week, media reports suggested that the government had announced a 10 percent duty waiver on dairy exports. The stocks soon after rallied in the last of trading hours on the same day with shares of Prabhat Dairy (+13.38%), Hatsun Argo Product (+4.75%) and Parag Milk Foods (4.82%) rallying in the 5 to 13 percent range.
The profits, however, were short-lived as these stocks declined up to 10 percent on Wednesday as an effect of the ongoing agitation amoung dairy farmers in Maharashtra. The share price of Prabhat Dairy dropped by 10 percent while Parag Milk Foods experienced a 5 percent decline.
The protests in Maharashtra have severely affected the milk supply in major cities of the state. Its state government has fixed the procurement price for milk at Rs 27 per litre. The farmers, however, have alleged that they barely make Rs 17 per litre. Additionally, with effect from July 21, private and co-operative milk unions have increased the procurement price of milk by Rs 3 per litre.
Despite the likely possibility of the state government providing a subsidy for the hike in procurement price by the unions, if any disparity is found in terms of passing the subsidy, profits of Prabhat could hurt more than of Parag, say analysts. This is because two-thirds of Parag Milk Foods' product portfolio consists of value-added products.