Weak rand boosts milk exports

The weaker rand and higher international milk prices have resulted in increased milk exports.

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Dairy products equivalent to 124 million litres were imported, while 330 million litres were exported from January to September this year. Dr Koos Coetzee, senior economist at the Milk Producers’ Organisation, said the gap between the SA producer price and import parity price had reached unsustainable levels. “Although it offers opportunities for exporters, it is a serious cause of concern for the local industry,” he said.

Producer price increases have been announced by milk processors in New Zealand, Australia and Europe. Fonterra announced a payout of NZ$8,12/kg for milk solids, equivalent to R4,93/l for SA’s average composition. At the Fonterra Internet sale in October, dairy product prices decreased by 1,9%. “Official US Department of Agriculture price data indicates that dairy product prices are currently substantially higher than the 2007/2008 peak.

“Although the drought in New Zealand is over, milk production will probably not recover before spring. Above-average numbers of cows slaughtered during the drought will limit chances of a spring production flush,” he said. Coetzee said that although a number of milk processors had increased their producer prices last year, the current average price of R3,80/l was still significantly below levels needed to encourage production growth.

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“Total milk production of 1 987 million litres during the first nine months of the year is only 0,43% higher than last year, compared with production growth of 4,7% in 2011/2012. It’s expected to remain below 2% for the rest of the year. Demand for dairy products continues to grow at more than 4%/ year.”