Dairy market trends for September

The South African dairy market is exposed to many uncontrollable risks, such as low producer prices amidst growing cost and unfriendly government policies. However, South Africa is self-sufficient regarding milk production and a net exporter (exports and sales to countries in the Customs Union included) of dairy products. Very few countries in the world are self-sufficient with regard to milk production.

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Milk-to-feed price ratio

The Milk Producers Organisation is concerned about the milk-to-feed price ratio, which decreased from 1:3 to 1:2 in September as a result of lower producer prices. This is expected to impact negatively on unprocessed milk production. The effect will be limited in the short term but may be more severe in the medium term.

Unprocessed milk production

Unprocessed milk production for September 2019 is estimated at 315 million litres, which is 3% more than in September 2018. Cumulative unprocessed milk production for 2019, including that of September, is 2 377 million litres, registering a growth of 0,56%. Growth over the same period in 2018 was 6%.

International dairy product prices

The upward trend for international dairy product prices since the beginning of 2019 was led by cheese, with butter providing further momentum. In August 2019, prices for all dairy products increased in both US dollar and rand terms. Growth in unprocessed milk production in the major dairy-exporting countries is poor and creates uncertainty in the world market regarding export availability.

In September 2019, both butter and skimmed milk powder prices strengthened in dollar terms while the prices for whole milk powder and cheddar softened. In rand terms, all the prices reduced due to a stronger rand in September.

Milk production at farm level is down for all the major exporting countries. This provides illumination on the strong increases in international product prices all round for the first eight months of 2019 and the current uncertainty on the Global Dairy Trade Index.