‘Service delivery challenges threaten dairy sector’

Service delivery challenges and the current unrestricted imports of dairy products are placing a question mark over the long-term sustainability of South Africa’s dairy industry.

This was according to Christo van der Rheede, executive director of Agri SA, who added: “A crucial part of this is the settlement of [developing] farmers. If even an established milk producer can’t survive, how can a new entrant [be expected to]?”

The latest figures published in Milk South Africa’s Lacto Data showed that South Africa lost about 43% of its dairy farmers between January 2015 and January 2021, with the total dropping from 1 834 to 1 053.

Bertus van Heerden, chief economist at the Milk Producers’ Organisation (MPO), said figures for the most recent period would be published in the May 2022 edition of Lacto Data.

Despite a decline in the number of dairy farmers, milk production had increased 26% over the past decade from 2,72 million tons in 2011 to 3,42 million tons in 2020, according to Milk South Africa.

Alwyn Kraamwinkel, CEO of the South African Milk Processors’ Organisation, said production had improved because “more competitive dairy farmers are replacing less competitive ones”.

“Worldwide, it’s clear that this situation has not been prevented by comprehensive government intervention, high farm-gate prices, or the integration of the farmers and milk processors.”

Countries around the world were in competition with each other, therefore “public infrastructure, energy supply, water quality and security are all issues that could make a dairy industry less competitive on a global scale”, he added.

Louisa Coomans, a dairy farmer in the Vryburg district, said the production costs of dairy farming were discouraging her and her husband from continuing with their operation.

“A reduction in Eskom’s electricity prices would be more welcome than an increase in farm-gate prices. We also don’t receive enough support from state veterinarians and Onderstepoort Biological Products, and that’s problematic,” she said.

In 2021, South Africa imported 60 600t of dairy products, and exported 46 700t, according to the South African Revenue Service.

Imports consisted of milk powder (33%), whey powder (28%), butter (12%), cheese (11%), milk and cream (9%), and buttermilk and yoghurt (7%). Exports comprised milk and cream (46%), buttermilk and yoghurt (22%), milk powder (17%), cheese (10%), butter (3%), and whey (3%).

Van Heerden said subsidies paid to farmers in the EU under the Common Agricultural Policy were distorting markets.

“The free-on-board prices of imported dairy products from the EU and [elsewhere] are unrealistic and unfair. Therefore, the MPO will be engaging with various government stakeholders, such as the International Trade Administration Commission, the Department of Agriculture, Land Reform and Rural Development, and the National Agricultural Marketing Council to see to what extent the local industry can be protected,” he said. – Susan Marais