Johannesburg - The devastating drought that has ripped through the country’s agricultural provinces and emaciated livestock has hit milk production with reports now emerging that South Africa may face serious shortages in the second part of the year.
First National Bank senior agricultural economist Paul Makube said yesterday that the shortages would lead to a rise in the milk price by at least 60 cents a litre from next month.
Read: Milk prices may rise as farmers struggle
Makube said the price increase would hike operating costs for the entire milk value chain, leaving retailers with no choice but to increase the price that consumers paid for milk and dairy products.
He said the cost would be passed on to consumers, leaving the already-stretched South African consumer with a steep hike in food prices.
“The challenge we are currently facing is that most dairy farmers are still recovering from the impact of the drought and will not be able to produce enough milk in the short term,” Makube said.
“Consequently, some dairy processors are already paying commercial farmers 60c more per litre on average for milk to ensure consistent supply in winter. Poor pasture conditions due to the drought and the sharply higher grain prices have squeezed margins at farm level and the increase should help improve the situation.”
Milk and general dairy products are key ingredients in the daily food basket of many South Africans, particularly the poorest of the poor.
Since last year, the price of maize, which is also used for cattle feed, has escalated rapidly and left South Africa needing to import in order to augment its available stock.
Grain SA said the March contract for white maize cost up to R4 781 a ton, while the same contract for the yellow variety climbed to R3 677 a ton at the beginning of this year.
The group said the prices for white maize, the staple crop that provides much of the caloric intake for lower-income households, more than doubled while those for yellow maize, used for animal feed, rose roughly 70 percent last year.
The government’s crop estimates committee also said it expected a harvest of just more than 7 million tons, 29 percent less than last year.
In check
Milk producer Clover said yesterday that it had managed to keep the milk price in check by implementing prudent actions.
“Clover sources most of its milk from the coastal regions, which have not been as severely affected by the drought in the country.
“The company’s unique milk procurement system also allows Clover’s producers to better plan production as they have visibility of off-take.
“Currently Clover does not expect a shortage of raw milk during winter.
“To mitigate any eventualities, the company has built sufficient inventory of products to see it through winter into the coming spring, when the high-flow season of raw milk commences,” Jacques van Heerden, the executive for legal, secretarial and human resources at Clover, said.
The severe drought, which has mainly hit KwaZulu-Natal, Free State, North West and parts of other provinces, has resulted in low availability of various feed components and this has, in turn, led to very high feed prices, which are still escalating and affecting raw milk production.
“Clover continues to monitor the situation closely and will implement prudent actions as the circumstances in different regions dictate,” Van Heerden said.
Demand and supply
Makube said the price of milk was determined by demand and supply from the market.
He warned that since dairy farmers were price takers and did not set the prices, the determination lay with milk processors who often increased the price paid to dairy farmers to guarantee supply as they also catered for the domestic and export markets.
However, recent rains across the country in the past few weeks are expected to go a long way to improving grazing conditions in the short term.
A report compiled by the Department of Agriculture, Fisheries and Forestry last year said the local dairy industry was important to the job market with more than 4 000 milk producers employing about 60 000 farmworkers and providing 40 000 people with indirect jobs within the value chain, such as in the milk processing and milling industry.
The chief economist at the Milk Producers’ Organisation, Koos Coetzee, said although the country faced a lower output of milk, it would not necessarily lead to a shortage of milk.
Coetzee said the drought had decreased production and had caused high feed prices and low roughage availability.
He said production was 4.5 percent lower than what it had been the year before.
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