In their latest dairy industry overview report, Milk South Africa found that retail sales of fresh milk and long-life milk have both fallen significantly. By the end of 2021, South Africans were buying 6.7% less fresh milk, and 4% less long-life milk than they were in 2020.
“The drop in sales volumes of fresh milk and long life is especially alarming since these two categories are responsible for a major part of the consumer dairy basket. Fresh and long-life milk utilise approximately 49 percent of the total unprocessed milk production in South Africa,” says the report.
Fanie Ferreira, chairperson of the Milk Producers Organisation (MPO), says that while the state of the dairy industry is not “all bad”, Mzansi’s milk producers are having a particularly tough time in today’s market, with rising input costs and poor public infrastructure putting pressure on their bottom line.
“We have extremely big challenges right now, like for instance our input costs, due to the war in the Ukraine. It was actually [a problem] before the war, [when] fertiliser prices started to rise. I think fertiliser prices have gone up by 400%.”
Ferreira also says that the cost of electricity has been particularly onerous to dairy farmers. He says unlike for grain or other large commodity farmers, the price of raw milk at farm-gate level does not increase along with the rising input costs.
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“If we can compare [ourselves] to the maize and sunflower industry, maize prices rise considerably. Dairy prices for unprocessed milk on from farm level [have also] risen, but not sufficiently to counter the input cost.”
A fragile stability
In the last few years, South Africa’s dairy industry saw a large amount of dairy farmers exit the trade. This, Ferreira says, is because the industry was simply no longer accommodating to small-scale farmers.
“The problem a couple of years ago was that a lot of dairy farmers, especially in the Highveld, left the industry. [This is] because typically your Highveld farmers were smaller farmers, producing less milk per farmer and milking fewer cows per farmer. And when input costs started to become a problem, especially diesel, [it affected] the transporters of milk.”
Ferreira points out that driving up to 30km for 500 litres of milk was simply not worth the expense, for both farmers and transporters.
The exodus of farmers has slowed down significantly, however, something Ferreira says is a good indication that the industry has become more stable.
“I think in the last year, we might have lost between 40 and 50 farmers, which is about 5% of our total farmers, and that is sad. It’s always sad to lose any farmer, but we don’t lose as many farmers as other industries do. A couple of years ago, yes, it was a huge problem. There were hundreds leaving per year, but [that number] did stagnate.”
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Smallholders part of local economies
Like with most farming operations, access to adequate roads is essential to a successful dairy farmer. Ferreira points out that this is one reason many coastal dairy farmers are still able to maintain their operations. These farmers are generally on the transporter route, and generally also have more cows.
“[Dairy] trucks have become bigger and bigger over the years. Ten years ago, the 16 000-litre tanker was basically the biggest. That was able to manoeuvre easier on small roads. Nowadays, all trucks are 30 000 to 32 000 litres. They are extremely expensive and extremely expensive to maintain, and they’re just not manoeuvrable enough to handle small roads. Of course, once a road is bad and it’s full of potholes, then it’s a problem. So the state, overall, of infrastructure in rural areas does have a considerable influence on the state of the smaller dairy farmer.”
He also says, like with any business, economies of scale are a major factor when it comes to sustainability.
“If you’re a dairy farmer maybe milking close to a tar road that is part of the route of a [dairy], and you’re about three kilometres from it- and you’re producing 500 litres, they definitely will be willing to pick up [your produce] because it makes financial sense. It’s not a clear, written rule. It really depends on a lot of factors. [But], definitely you’ll make more profit off milking more cows just because the scale of cost does make it much more profitable. I mean, it’s like that in any industry and maybe in any business.”
For Kireshni Naiker, an agricultural consultant and former dairy farmer, the exclusion of small-scale farmers from the dairy industry is also partly due to a lack of focus on these types of farmers. She says that, in her line of work, she noticed there is a big gap in the industry for producers of a smaller scale.
“I’ve noticed that there’s very little information and very little support for small-scale dairy farmers in South Africa. There’s a lot of people in the industry that are interested in helping with this because I think they realise that the dairy industry is very closed off. It’s just basically insiders and information is passed amongst themselves, not really shared that much. And also, it’s very focused on commercial farmers.”
Ferreira, however, highlights that in today’s market, small scale dairy farmers can contribute to the local economy of their area.
“In the highveld, right now you will see, for instance, there [are] small cheese factories and smaller guys that will buy milk for whatever reason, and they are located in the area where there’s a couple of small farmers. That community will still thrive and [those farmers] will still go on.”
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