07 Sep 2011 SA’s disappearing dairy farmers
Dairy farmers in SA could soon be extinct, with almost two-thirds having already deserted the industry over a little more than a decade as their margins have shrunk.
And though the production of milk in SA has increased slightly over that time as farms have grown in size, the defection of almost 5 000 dairy farmers has caused severe job losses.
The number of dairy farmers has declined from 7077 in 1998 to 2686 at the beginning of this year. A total of 646 of SA’s dairy farmers packed up in just the 10 months from March last year to January this year.
Koos Coetzee, chief economist of the Milk Producers’ Organisation, which represents about 85% of dairy farmers, says prices now being paid to farmers are on average 5% lower in nominal terms than a year ago.
In addition, input costs — maize, soya, diesel and electricity — are substantially higher and the combination of factors is squeezing dairy farmers out.
At least 10 jobs are lost for every farmer who exits the industry.
Dairy farmers are currently receiving an average of R2,98/l for milk. Shelf prices are R7,50/l-R8/l. All deals between farmers and processors are negotiated individually, and there is no set price for milk.
But the SA Milk Processors’ Organisation, which represents most of the secondary milk industry, says the industry picture is not as dire as Coetzee paints it .
The organisation’s business economist, De Wet Jonker, says the reduction in the number of dairy farmers represents the failure of uncompetitive and ineffective producers. “It is not just a phenomenon in SA but also in Europe and in countries like Canada.”
He admits dairy farmer numbers are falling quickly but says that does not mean it will “end at zero”.
“More competitive dairy farmers are simply getting bigger as the smaller ones drop out. We too would like to see more farmers and a more competitive environment, but what we have now is a result of competition.”…..
