Shortage fears as milk prices tank

Johannesburg - There could be a shortage of milk next year if the producer price is not increased, the Milk Producers' Organisation said on Wednesday.

"We are price takers and in the hands of the larger processors which are price setters," said Bertus de Jongh, CEO of the Milk Producers' Organisation.

He said milk processors usually raise the price they pay dairy farmers for milk in early winter when supply drops. However, this year there was a milk surplus and so the price did not go up.

It is now lagging behind the rest of the world, De Jongh said. "Producer prices are on average 10% below the 2009 level."

At the same time, input prices went up sharply, he said. Maize prices had shot up by 80% and soya prices by 26%.

Fertiliser prices had increased by between 23% and 39% from September 2010, and the diesel price had risen by 26%.

Producers under pressure

"This combination of lower producer and higher input prices puts serious pressure on milk producers and limits any chances of higher production."

Milk consumption is increasing by about 5% a year by volume, while production remains almost static.

"We could run into problems next year from March when production drops. This is normally when we experience cyclical shortages," De Jongh said.

"The total local milk supply is at the same level as in 2010 and under downwards pressure from very high input costs."

This could force dairy farmers to leave the industry, he warned.

The Milk Producers' Organisation represents the vast majority of primary milk producers in South Africa.