Johannesburg - Food and beverages company Clover yesterday said the country would have enough milk supply until the end of the year despite the devastating drought that has ravaged the southern African region.
The company reported that a prolonged drought primarily in the Highveld and Kwazulu-Natal increased feed process due to maize shortages and the scarcity of good quality roughage. Due to the resulting lower milk prices and higher feed costs, raw milk production eased and Clover was compelled to pass price increases on to producers to protect the primary industry.
The company on Tuesday said that the availability and cost of feed still impacts the producers and there is a current challenge to supply the forecasted market with milk, however milk flow during this spring and summer will determine market conditions for next winter.
Chief executive Johann Vorster said the drought had not yet affected the supply of milk in the country. “These two areas haven’t been really affected by the drought and our milk supply is in good shape.”
The company said only the weakening foreign exchange rate had pushed up cost inflation and forced Clover to raise selling prices on all product categories in April.
Vorster said it also experienced sharp increases in ingredients costs.
He said that although the country was covered for milk at the moment, related costs such as currency fluctuations and high feed costs could force it to review its prices.
“The severe drought... 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,” said Vorster.
Paul Makube, a senior agricultural economist at FNB, said the high feed costs could have a negative impact on the price of milk in the future.
Stable prices
Makube said they expected prices to remain stable with predicted rains going forward.
Another agricultural economist, Wandile Sihlobo from Agbiz, said the country had enough milk supply currently.
“There is an oversupply of milk globally. Normally the supply of milk during the winter season is down not only because of the drought but the winter season which is dry adds to the lower milk production. If the country doesn’t have milk it can import it at lower prices.”
But the Land Bank warned that the persisted drought has already affected the country’s dam levels. The bank’s chief executive Petrus Nchocho said dam levels were sitting at an average of 53 percent throughout the country.
Nchocho said this would result in less grain production for the year, especially maize, which could push the prices up. He said the drought would affect the agricultural industry on how it had serviced its debt.
“At the end of the day it balances out because if a farmer from one region has been badly affected, the other farmer in another area might not be affected at all. So that is why we have managed to see our non performing loans (NPL) decreasing despite the drought. NPLs are 8.8 percent to R2.2 billion as compared to 9.7 percent in 2015.”
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