Big dairies follow Parmalat in raw milk price drops

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Credit: Danilo Rizzuti

The news comes in the wake of last month's announcement that Parmalat would be slashing the prices the company pays its suppliers for milk.

The Daily Dispatch reported earlier last week that Parmalat had declared East London "no longer viable" and planned to stop collecting milk from the region's dairy farmers, who currently sell 20 000 litres of milk a day to the company.

Drastic cuts

Now Clover has announced its intention of dropping its milk purchase prices by 18c a litre from 1 July.

Dairy Belle will also be dropping its purchase prices - by 25c a litre - from next month.

But the biggest shock has been Lancewood's massive 60c drop.

At a meeting held in Swellendam recently, the company announced that it would be dropping its milk purchase prices by 30c a litre, "effective immediately".

Then, on 1 July, it will drop its purchase price by another 30c.

Lancewood CEO Fred Anderson was unavailable for comment on Thursday, 3 June.

Commission not responsible

The Competition Commission's media spokesperson, Keitumetse Letebele, said that the dairy companies' decision to cut milk purchase prices had "nothing to do" with the commission.

She said not all price fluctuations necessarily went through the commission.

Competing

The owner of East London's Sunningdale Dairy, Neil van Rensburg, on Thursday told the Dispatch that he was now left with no other option but to adjust his purchase prices accordingly.

"We compete with these guys and the market is highly competitive at the moment. We need to keep a balance."

Van Rensburg attributed the price drops to the current market situation.

"The current economic situation has resulted in consumers putting pressure on suppliers ... wanting a cheaper product.

"And obviously once Parmalat dropped its prices, the other big dairy companies needed to follow suit, otherwise they will sell less milk at supermarkets."

Massive impact on farmers

Van Rensburg said the recent price drops would have a huge effect on the region's dairy farmers and could possibly "put them out of business".

Parmalat communications manager Karen Geldenhuys said the company had no alternative but to reduce the milk price, "given all of these unfavourable conditions".

"We constantly monitor the situation and will review our decision if market conditions recover," she said.

"Parmalat and other players in the food processing industry have been hit hard by large increases in our input costs.

"In order to not simply pass this on to already-struggling consumers, we have to look at decreasing our input costs, and raw milk makes up a huge percentage of that."

Commenting on the situation, the Southern Africa Milk Co-operative's East London representative, Jack Willows, said: "We were concerned from the beginning that Parmalat's announcement would set a precedent ... It is hard to understand why everyone else just seems to be following suit."

Source: Daily Dispatch