South Africa's dairy sector in trouble

Despite better producer and lower feed prices, milk production in this country remains under pressure. Chances of a recovery remain slim, says Dr Koos Coetzee.

- Dr Koos Coetzee

South Africa’s milk producers have faced stagnant producer prices and sharp increases in input prices for many years.

The milk:feed price ratio, the ratio between the price of a kilogram of feed and the producer price of a kilo of milk, provides a reliable indicator of the profitability of milk production.

A milk-to-feed ratio of 1,3:1 will keep the industry in balance. If the ratio drops to below that, milk production will not increase. If the ratio stays at that level, production will decrease.

Local milk production decreased in 2020, 2021 and 2022. Total production during the first half of 2023 is 1,7% lower than during the same period in 2022.

The profitability of milk production has improved since mid-2022.

The price of feed, based on 70% maize and 30% soya beans, decreased from R6 700/t in November 2002 to R5 048/t in April 2023.

The producer price of milk pushing the price ratio to its highest level of 1,5:1 since August 2018.

SAFEX FUTURES

The latest (August 2023) feed prices of R3 694/t (yellow maize) and R8 920/t (soya beans) are equal to a weighted feed price of R5 230/t.