Despite agricultural economists saying dairy farmers need to be paid at least R2,20 a litre by this month to remain financially viable, big milk buyers Clover and Parmalat have said they are willing to give KZN farmers R1,96/litre, an increase of only 15c a litre, backdated to 1 February of this year.
At a recent meeting near Howick, dairy farmers gave management and Producers’ Group a detailed presentation of the financial challenges they are facing following the last price increase they received two years ago. “Clover management said they could give us 15c/litre maximum because the company had not generated enough income in the interim to be able to afford any bigger price increases,” said KZN Milk Producers’ Organisation chair and supplier Quentin Simpson.
“This will only push our average milk price up to R1,96/litre, far below the R2,24 to R2,30/litre we need.” Clover said another price increase could only be implemented if the market was willing to absorb the increase. despite the company saying the predicted price hike for imported milk powder from $3 000/ton to $4 000/ton would make it too expensive to continue importing it, resulting in a milk shortage in the country.
Following Clover’s introduction of a “Cost to Serve” system that now forces producers to pay for milk transport costs from farm to depot relative to their distance from the nearest depot, the 15c/litre increase will do little for farmers in outlying areas such as East Griqualand who now will have 52c/litre deducted from their payments because of the new costs.
Simpson said producers were considering options that would keep their businesses competitive, but he did not volunteer what these could include. lover SA deputy chief executive Manie Roode said the company was very sensitive to the financial challenges facing its producers. “Last year we changed our milk payment to producers structure because we realised that our dairy producers in various regions of KwaZulu- Natal faced their own cost of production dynamics.
At the Howick meeting we heard the various producers’ problems and have taken their comments under serious consideration. We will be reverting back to them on the issue very soon,” he said. – Lloyd Phillips
