"Producing enough milk for local consumption as well as some export is not where the problem lies. Doing this profitably is the biggest challenge to our farmers who are amongst the most efficient, non-subsidised milk producers in the world," he says.
"Milk producers also have the right to ply their trade in a fair business environment and all we demand is a fair price for the food we produce and to be respected within the food value chain," adds Dèan Kleynhans, a milk producer in the Western Cape and chair of the MPO.
While producer prices decreased since 2009, input prices increased sharply according to Dr Koos Coetzee, chief economist at the MPO.
This combination of lower producer and higher input prices puts serious pressure on milk producers and limits any chances of higher production.
In contrast to the South African situation, the international situation remains positive. Dairy product prices increased sharply after the 2008 slump and prices are still substantially above these levels.
According to Dr Coetzee, although milk production in 2011 is at a slightly higher level than during 2010 in all the major dairy exporting countries, EU intervention stocks are practically zero. Rapid growth in the demand in developing countries as well as an expected decrease in production, caused by higher feed and energy prices, will result in upwards pressure on international product prices in following years.
Total production in South Africa during the first ten months of 2011 is marginally higher (+0.3%) than during the same period in 2010. Dairy demand continues to show growth of more than 5% per year.
Retail prices of dairy products have stagnated somewhat. However, according to official Stats SA figures, fresh milk currently sells for 3.5% more than the same period last year. The price of dairy products at processor level (the price milk processors get for their products) was 1.1% higher in September 2011 than during September 2010. Therefore, it seems as if milk processors were able to keep price levels intact while increasing volume growth.
Unless milk producers receive a substantial price increase soon, more farmers will leave the supply chain and milk buyers may find themselves in supply difficulties early in 2012.
For more information, log on to www.mpo.co.za.