Dairy farmers join call to up prices
EASTERN Cape milk producers have supported a national call for the price of milk to increase to sustain the dairy industry in the province and country. Last year the Eastern Cape produced 25% of the country's 2.7 billion litres of milk.
Milk Producers' Organisation (MPO) chairman Tom Turner has called for producer price increases – which he said was vital in determining the future sustainability of the dairy industry.
Turner said dairies bought milk from farmers at an average price of R3.90 per litre, which "does not cover input costs, making dairy farming unprofitable". With many farmers forced to exit the industry, Turner said milk supply was expected to come under pressure this year, despite the steady growth in the demand for dairy products.
MPO Eastern Cape chairman Simon Matthews, who farms with 1000 dairy cows in the Alexandria region, said the province supplied 25% of the country's 2.7 billion litres of milk last year.
"We had below average rainfall last year and we support a better deal for dairy farmers because the price has not kept up with inflation. The high cost of maize, fuel and power for our irrigation systems, which we mostly use in the province, combined with increased labour costs, are all putting us under pressure. Even though there is not a shortage of the product on shelves yet, I believe it is because consumers are also starting to feel the pinch."
Matthews said some farmers in the Eastern Cape received as little as R3.50 per litre of milk and that these below-average prices were not keeping track with "the tough job of producing a litre of milk".
He said he understood there were a lot of hidden margins for the dairies to pasteurise and package the milk and that retailers added to the high shelf cost of milk, but farmers, who were at the bottom of the chain, should be taken into consideration.
Matthews said the Eastern Cape was second only to the Western Cape in terms of volumes of milk produced. The regions best known for milk farming are Humansdorp/Tsitsikamma, Fish River/Cookhouse, Alexandria, East London and Queenstown.
Humansdorp's Woodlands Dairy chairman and chief executive Lex Gutsche acknowledged that cost pressures at farm level had made dairy farming largely unprofitable.
"I would hasten to state, however, that efficient farmers are still making profits, although not at such healthy levels as one year ago. Cost pressures at our processing operation have also escalated to an at least equal extent as the farmers' and [possibly] even more so, due to our heavy reliance on steam energy and diesel fuel for distribution.
"I would be very willing to pay higher prices to our farmers if I could recover the additional cost from the market. We have always endeavoured to pay the highest price possible to our farmers."
Gutsche said the real problem in the market was a lack of responsible pricing from certain dairies who continued to damage the industry by keeping prices down at unsustainable levels to increase market share and keep their customers happy.
"Being a commodity product, competitors have to be competitive on pricing or risk vast drops in volumes and so are forced to lower prices to match the dissidents. The knock-on effect is that responsible players are unable to lift prices and thus the farmer suffers in the long run due to resultant lower prices being paid," Gutsche said.
He said that during the summer when there was a lot of milk available, dairies and retailers had to sell off large amounts of fresh milk at discounted prices just to get rid of it as they could not store it for long periods.
"The only way to pay higher prices to the farmer is to realise higher prices from the market, and this will only happen once everyone involved acts responsibly," Gutshe said.
