This was the stark picture painted during a Farmer’s Weekly panel discussion titled Dairy under pressure: balancing herd health, processing efficiency, and market volatility in the dairy industry, held at the Royal Show on 9 October.
Speaking on the panel, dairy farmer Tom Turner said the number of dairy farmers in South Africa had declined from approximately 7 500 to just 830 during his farming career, largely because producers had been forced to expand and improve efficiency to remain viable.
Yet even among the most efficient producers, profitability remains elusive. Turner said that in a study group comprising 65 dairy farmers, only the top 20% consistently achieved returns on capital exceeding what they could earn by investing their money in the bank.
“Most dairy farmers would be financially better off selling their operations and putting their money in the bank. That is the reality, and these [study] figures were recorded during a particularly good year for dairy farming,” he added.
Dairy farmer Andrew Morphew, who is also the spokesperson for FMD Response SA, illustrated the cost-price squeeze through the declining purchasing power of milk.
“In 2016, a farmer needed to sell 1,49ℓ of milk to buy 1ℓ of diesel. In 2026, that same litre of diesel costs 3,6ℓ of milk. The purchasing power of raw milk has declined significantly relative to our input costs,” he explained.
While farmers had responded by increasing production and reducing costs per litre, Morphew warned that this strategy was reaching its limits.
“We are putting more milk into a market that doesn’t have the money to pay for it. As population growth outpaces economic growth, consumers have less disposable income, and that puts pressure on demand,” he said.
Turner agreed that expanding production without growing demand was becoming increasingly destructive.
“If I want to grow my farm, I am effectively putting another farmer out of business. I need to grow production by 5% to 10% annually just to keep ahead of the economics of dairy farming, but the market is not growing,” he said.
Efficiency has its limits
Both farmers emphasised that producers were already closely monitoring production efficiency, leaving little room for further savings without compromising productivity.
Turner said his operation measured feed intake, milk production, and margins over feed costs every week, integrating financial and production data to guide decisions.
“If you reduce concentrate feeding by 2kg and lose 4ℓ of milk, you’re worse off financially. The challenge is to reduce costs without sacrificing productivity.”
However, he questioned whether the same efficiency standards were being applied throughout the value chain.
“Farmers benchmark themselves internationally, but are our processors and retailers doing the same? Farmers are residual price-takers: everyone else takes their share, and we receive what’s left,” Turner said.
Growing the market
Turner argued that reversing the industry’s decline required greater investment in dairy marketing, product innovation, and exports.
He estimated that dairy marketing expenditure was below 1%, compared with the approximately 10% he believed major consumer goods companies should invest.
Morphew stressed that broader economic growth was essential to restoring consumer purchasing power.
Turner added that dairy farms contributed significantly to rural economies through employment and local spending. He estimated that his operation supported 3 000 livelihoods, directly and indirectly.
“I get a milk cheque once a month, and within two days, I’ve spent 90% of that within 100km of my farm.”
He concluded that economic growth, stronger export markets, and renewed investment in dairy marketing were essential to creating opportunities for farmers to expand without undermining one another.
