Milk shortages provide advantage to embattled SA dairy farmers

The price of milk worldwide is rocketing - and SA is caught up in it as local demand outstrips supply for the first time. Etienne Terre'Blanche, MD of the Milk Producers' Organisation (MPO), says milk shortages in some areas are due to normal cycles, combined with exceptional economic factors. "Typically, the industry has a low production cycle from about February or March to July, when it picks up again and rises until it peaks in December. This is due to factors such as the lactation cycle of cows," Terre'Blanche says.

In recent years, however, the consumption of milk has increased sharply every year, driven by the larger personal incomes of SA's emerging middle class and accompanying dietary changes. "There hasn't been a marked drop in production," says Terre'Blanche, "But the demand for milk is now outstripping supply by about 2%/ year." Reports specially mention the unavailability in many instances of low-fat and "long-life" milk. Terre'Blanche says this is because most of the available supply is being used in the production of fresh full-cream milk, for which there is a much stronger immediate demand. And importing milk will bring little relief, because of a current shortage worldwide that could take up to two years to correct.

The current situation comes as a boon to SA's hard-pressed dairy farmers, who until recently have been squeezed by the country's milk processors. Now, as the demand for their product rises, they are starting to flex their collective muscle and eyeing improved prices. There were 3,899 milk producers in business in SA in January this year. The number has dwindled from about 30,000 farmers in the 1980s, through to 7,077 a decade ago and 4,184 a year ago, according to the MPO.

Though the figures show that on average 24 dairy farmers quit the business each month last year, the figure is misleading because, says Terre'Blanche, it involves consolidation of the industry through many of the smaller farmers selling their dairy herds to larger, more specialised farmers, so that milk production has become more efficient. "It is significant, though, that the hardship in the industry has driven many smaller farmers out," he says.

Financial Mail