Rising fuel prices, driven by supply chain pressures stemming from geopolitical tensions in West Asia, are adding fresh pressure on India's livestock and dairy sectors. Industry officials say higher transportation costs are driving up feed and input costs, squeezing farmers' margins and raising concerns about the affordability of protein-rich foods.
The impact is being felt across the animal protein value chain, from poultry and aquaculture farms to dairy processors and feed manufacturers. The challenge comes at a time when livestock businesses are already grappling with volatile commodity prices and geopolitical disruptions affecting global supply chains.
Notably, India remains the world's largest milk producer, with milk output rising to 247.87 million tonnes in 2024-25, according to the Department of Animal Husbandry and Dairying.
Ayush Sharma, Principal at global management consulting firm Kearney, said, “India’s animal protein industry—dairy, poultry, and aquaculture—is under serious pressure. Rising fuel, feed, and transport costs are squeezing farmer and processor margins from all sides.”
“Businesses that rely on reactive measures like periodic price hikes will keep losing ground and companies that will protect margins are those that address the root causes. That means sourcing inputs locally wherever possible, streamlining logistics networks to cut delivery costs, and locking in prices for key inputs through forward contracts and hedging—building operations resilient enough to withstand the next cost shock, not just the current one.” said Sharma.
Fuel, feed costs pressure livestock sector
Rising diesel prices are increasing the cost of moving feed ingredients and finished products across the country, creating pressure throughout the value chain. “With rising fuel and transportation costs, prices of eggs, chicken, and other essential protein products are witnessing frequent fluctuations across the agriculture and allied sectors,” said Divya Kumar Gulati, Chairman of the Compound Livestock Feed Manufacturers’ Association of India (CLFMA).
According to his estimates, cost pressures across the sector are 10-30% higher than a year ago. He said the impact is felt across the value chain because feed remains the single largest cost component for poultry and aquaculture producers. “Since feed accounts for 60-70% of production costs in poultry and aquaculture, even small increases in logistics expenses have a direct impact on farmer margins and consumer prices,” he said.
Ranpal Singh Dhanda, Owner of Unnat Feeds and President of the Poultry Federation of India, told The Economic Times Digital that shipment insurance costs have risen by an additional 25%. Factoring in logistics delays, overall cost pressures have increased by at least 40% compared with previous levels.
Notably, the latest fuel-price pressure is adding to cost challenges that have persisted across the livestock value chain for several quarters. Producers have already been dealing with volatility in feed ingredients such as maize and soybean meal, elevated logistics expenses, and periodic supply disruptions linked to global geopolitical developments.
The sector’s importance to the broader rural economy has also grown steadily. According to official government data, livestock accounted for 30.87% of agriculture's Gross Value Added (GVA) in 2023-24, highlighting its increasing contribution to farm incomes.
Economists warn that the recent fuel and milk price hikes could add 40-50 basis points to retail inflation from June, potentially pushing headline inflation towards 5%. Industry officials attribute the increase to rising transportation costs, elevated feed prices, and geopolitical disruptions affecting global commodity markets.
The concerns come amid a rise in transportation fuel costs in recent months. Diesel prices have increased by around Rs 4-5 per litre since February, while CNG rates have also moved higher in several states, adding to logistics expenses for sectors dependent on extensive procurement and distribution networks.
Dairy sector feels heat as inflation risks mount
Industry players say the impact of fuel inflation extends beyond poultry and aquaculture, with the dairy sector also facing rising procurement, transportation and distribution costs.
Rahul Kumar Srivastava, Chief Operating Officer of Parag Milk Foods, said the dairy industry is particularly exposed because of its extensive procurement and distribution network. He estimates that dairy firms now need 15-25% higher working capital to sustain their day-to-day operations. “India’s dairy industry, producing nearly 680 million litres of milk per day, has one of the largest and most complex logistics networks in the country. Milk is transported from villages through bulk milk coolers (BMCs) and chilling centres to processing plants, followed by extensive temperature-controlled distribution to ensure safe and high-quality dairy products reach consumers,” Srivastava said.
Any increase in fuel prices directly affects both milk procurement and distribution economics, he said. “Higher fuel costs lead to increased prices of critical inputs, such as cattle feed, packaging materials, ingredients, and transportation services,” he said, adding that the cumulative effect creates a major challenge for an industry that operates on relatively thin margins to ensure affordability for consumers.
The cost pressure is already materialising at the retail level. In May, Amul and Mother Dairy, India’s two largest dairy brands, raised milk prices by Rs 2 per litre nationwide. This marks the second such increase by both cooperatives in 13 months. In June 2026, Amul also raised milk procurement prices, with buffalo milk up by Rs 10/kg (fat) and cow milk up by Rs 4.55/kg. The company says this hike was driven by rising operational costs for farmers, including higher prices for cattle feed, fuel, and transportation.
The pressure on feed costs is also being amplified by disruptions in global agricultural commodity markets, particularly for ingredients that form the backbone of livestock and dairy nutrition. Kumar Ranjan, Chief Executive Officer of eFeed Life Sciences, said ongoing conflicts and trade disruptions are creating a broader commodity shock that extends well beyond crude oil prices.
“The geopolitical turbulence has created a cascading commodity shock that the dairy and livestock feed industries are ill-equipped to absorb quietly. Crude oil price volatility directly inflates logistics costs, but the deeper damage runs through soybean meal, maize, and distiller’s dried grains with solubles (DDGS),” Ranjan said. These key feed ingredients, he said, are linked to global trade routes affected by conflicts, sanctions, and supply disruptions.
According to him, Indian dairy cooperatives and commercial livestock farms are increasingly finding themselves caught between regulated or market-linked procurement prices and sharply rising feed expenses. "Indian dairy cooperatives and commercial farms are now caught between MSP-linked milk procurement prices and feed cost inflation running 18-25% above pre-war baselines,” he said.
The combination of rising fuel bills and elevated feed costs is becoming particularly challenging because feed represents one of the largest expenditure heads for livestock farmers. Any increase in the cost of transporting feed ingredients eventually filters down to farm-level economics and, in many cases, retail prices.
Gulati said continued fuel price increases are making it more difficult to keep protein products affordable and competitive in domestic as well as export markets.
Ranjan highlighted that feed manufacturers are increasingly operating under margin pressure. “For the feed industry, thin formulation margins are forcing dangerous substitutions that compromise animal productivity and long-term herd health,” he said, underlining that the sector needs structural solutions rather than temporary relief measures.
Gulati added that policy support aimed at strengthening agricultural logistics could help mitigate some of the pressure. He added that rationalising fuel taxes for agriculture, expanding rail and water-based transportation networks, and improving agri-logistics infrastructure could help lower costs across the value chain.
He further highlighted that encouraging local sourcing and decentralised feed production can help reduce dependence on long-distance transportation and improve supply chain efficiency. According to him, keeping input costs stable is critical not only for supporting farmers and agri businesses, but also for ensuring affordable protein-rich food products for consumers.
Ranjan emphasised that the long-term answer to the current crisis lies in improving feed efficiency and reducing dependence on volatile global commodity chains. The sector should focus on precision nutrition, alternative protein sources, and data-driven feed optimisation, he said.
