Prospects for the struggling dairy-farming sector are looking better following a decision by milk processors to raise prices this year, according to a farmers’ representative body.
Milk Producers’ Organisation (MPO) MD Etienne Terre’Blanche said the current milk shortage occurred after processors slashed prices from early 2005, causing farmers to cut production and look for alternative income streams.
But Terre’Blanche said that despite lingering anger over the price cuts, the mood among farmers is more positive following price increases this year, Business Report reported on Thursday.
Clover executive director Chris Lerm said the company raised prices for delivered milk by 80c a litre this year to a national average of about R3. A 30c-a-litre hike will follow next month as the processor stimulates production until supply meets demand.
Terre’Blanche said that processors had previously used cheap imports as leverage to keep prices down, ”but it [the strategy] has come back and bitten them” after a steep climb in global prices.
He said that while dairy farming is entering a phase of medium-term sustainability, farmers want further price hikes and are considering clubbing together to gain negotiating clout with processors.
He said the supermarkets have the strongest negotiating power in the supply chain, followed by processors, with individual farmers in the weakest position.
Factors such as drought, growing demand from the rising consumer market and higher maize prices have also led to nationwide milk shortages, he said.
MPO director Bertus de Jongh estimated the country will produce 5,6% less milk this year than the usual 2,5-billion litres. — Sapa