The Milk Producers’ Organisation (MPO) and the National Agricultural Marketing Council (NAMC) will launch an investigation into input costs and the effect thereof on the profitability of milk producers.
“Input costs, and especially animal feeds, play a vital role in dairy farming,” says Etienne Terre’Blanche, managing director of the MPO. “This project forms part of the MPO’s initiative to render an effective service to its regions. The MPO is looking forward to the results that can be achieved with this project.” According to Prof André Jooste of the NAMC, the project is a continuation of the NAMC’s investigation into input costs. The NAMC already published reports on input costs in the maize and fruit industries. The joint survey will take place during February and March and a report will be published midyear.
Not only will the report provide farmers with important benchmarks, it will also indicate whether certain input costs are unfairly high and where possible unfair practices occur. The MPO’s agricultural economist Dr Koos Coetzee says dairy farmers’ feed costs alone make up 70% of their expenses. “The average dairy farmer spends about R1,3 million on input costs per month,” says Dr Coetzee. “We don’t expect to find any unfair practices, but we do know the suppliers’ dominant position in the market enables them to keep prices high.
When the Safex prices go up, feed costs go up, but when they go down, feed prices remain high. It’s believed that some suppliers are ‘sticky on top’, so to speak, and that they are abusing their position of power.” Rayton dairy farmer Jane Cronjé says feed costs have doubled in the past 18 months. “Feed is undoubtedly the biggest input cost. Everything else escalates along with inflation, but feed costs are soaring. I welcome this investigation, as believe there are unfair practices taking place. When you mix your own feed, it costs up to R500/t less. It makes you wonder how, as an individual, you are able to mix feed so much more cheaply.” – Cornelia du Plooy