CERTAIN DAIRY BUYERS’ PRICES ARE SHAMEFUL

MPO FLASH 10/28 October 2020

The MPO is keeping its finger on the pulse of the dairy industry, and specifically the heartbeat of the primary part of the industry in the value chain. The following facts are well known:

• grain prices are high and show no sign of declining;
• drought conditions still prevail in certain parts of South Africa;
• the cost of intermediate inputs, such as electricity, are constantly on the rise; and
• milk producers had to develop capacity (capital expenses) to deal with erratic electricity supply.

In light of these factors, as well as others that have been previously highlighted and which resulted in a cost squeeze on the economics of unprocessed milk production, the low level of the producer price paid by an important dairy buyer in September 2020 is alarming. The producer price of unprocessed milk in September ranged between R4,45 and R6,08 per litre, or put differently a range of more than 36%.

Bertus van Heerden

Chief Economist MPO