Shortage fears as milk prices tank

Shortage fears as milk prices tank

FMCG SUPPLIER NEWS

Fin24 - Nov 24th 2011, 08:50

Johannesburg - There could be a shortage of milk next year if the producer price is not increased, the Milk Producers' Organisation said on Wednesday. 

"We are price takers and in the hands of the larger processors which are price setters," said Bertus de Jongh, CEO of the Milk Producers' Organisation.

He said milk processors usually raised the price they paid dairy farmers for milk in early winter when supply dropped.

However, this year there was a surplus of milk and so the price was not increased.

The price was now lagging behind the rest of the world, De Jongh said.

"Producer prices are on average 10% below the 2009 level."

At the same time, input prices had sharply increased, he said.

Maize prices had increased by 80% and soya prices by 26%

Fertiliser prices had increased by between 23% and 39% from September 2010 and the diesel price had increased by 26%.

Producers under pressure

"This combination of lower producer and higher input prices puts serious pressure on milk producers and limits any chances of higher production."

Milk consumption was increasing by about five percent a year by volume while production remained almost static.

"We could run into problems next year from March when production drops. This is normally when we experience cyclical shortages," De Jongh said.

"The total local milk supply is at the same level as in 2010 and under downwards pressure from very high input costs."

This could force dairy farmers to leave the industry, he warned.

The MPO represents the vast majority of primary milk producers in South Africa.