Farmer's Weekly (South Africa)
Dairy industry down but export opportunities rise
The dairy industry is set to remain stagnant in 2024 as economic pressure on consumers reduces demand. The local industry however remains in a stable position although growth options are limited.
Fanie Ferreira, CEO of the Milk Producers’ Organisation
(MPO), noted that higher farmgate prices achieved in 2023 have increased the sustainability of farmers.
However, milk production last year was moderately lower than in 2022, with the prediction for 2024 being similar to 2023. Ferreira cited insufficient consumer demand as the reason why milk production would not increase, and said neither would milk prices.
Challenges in South
Africa’s dairy industry remain biosecurity, unpredictable weather and political uncertainty, all of which either affect production or demand.
The situation is not unique to South Africa, and globally milk producers are waning under low demand for milk products. Alwyn Kraamwinkel, CEO of the South African Milk Processors Organisation (SAMPRO) said that dairy demand had been on a downward trend since 2022. Prospects for next year are equally poor due to low economic growth globally and in South Africa.
“Low economic growth and high levels of uncertainty in the world about future political and economic developments, created by various well-known military and other conflicts in various regions of the world, have a negative effect on, among others, the dairy industry in the world,” said Kraamwinkel.
“This position and the high level of uncertainty about factors that can potentially limit growth in 2024 in South Africa, does not support optimistic views about significant growth in the demand for consumer products, including dairy products, in the immediate future.”
Concern over the El Niño is also present in the dairy industry. If droughts do occur, production is expected to be negatively affected. Ferreira, however, noted that most of the production regions, which are situated near the coast and where good rain has fallen, should be able to keep production stable.
Opportunities abound for dairy exports in 2024. Ferreira said that the MPO hoped to see more production at the primary level in the future to take advantage of export opportunities, given the prevailing exchange rate. “Production costs for South African dairy farmers still remain low, compared with international production costs. Taking into account the exchange rate, we are convinced that there must be export opportunities in the future,” said Ferreira.