Current milk producer price not sustainable – Turner

South African dairy producers are regarded as some the most efficient in the world, but the price of milk will have to increase sharply to avoid a potential crisis in the country.

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This was according to SA Milk Producers’ Organisation (MPO) chairperson, Tom Turner. He said the gap between the local producer price of R3,65/l and import parity prices at R5,80/l was at the highest level ever. “We are not asking anybody to cross subsidise our industry because of ineffiencies. The fact is that we are internationally competitive on the production side, but the price of milk in SA is simply too low for long term sustainability and profitability,” he said.

Turner said milk production was an internationalised business with virtually the same inputs all over the world. Maize, soya bean, urea and diesel prices, for instance, were all linked to the US dollar. The only difference between local producers and their global counterparts was the producer price of milk. “If milk prices don’t improve, SA might lose a part of its economy that is efficient and internationally competitive. If that happens we will have to import milk, which could push up local consumer prices by as much as R5/l from an average of R9/l to R14/l.”

MPO Free State chairperson, Bernard Maree, said the average producer price in the Free State was about R3,80/l. About R1,80 of the price went towards animal feed while the rest was allocated to additional inputs such as electricity and labour. The price gap has cut the profit margins dramatically, which was evident in the sharp decline in the number of dairy producers in the province. “Our numbers have declined with about 75% over the past ten years to the current 400. We simply cannot maintain the status quo.”

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