Price of Raw Milk Goes Up

Despite a unanimous decision last week by the Namibian Dairy Producers Organisation Congress to increase all locally manufactured dairy products on average by 4.7 per cent with immediate effect, the local dairy industry is gearing itself towards becoming self-sustainable in the future which could result in cheaper prices for the consumer.

Prices of electricity and transport and higher wages for workers in the industry prompted the price increase as producers have been subjected to severe increases in commodity prices and it was a matter of time before these increases reflected in the consumer price. Despite free market principles prevailing in the Namibian dairy market, the local producers and processors are at a disaantaged position against imported products by about N$2.5 per litre. This relates mainly to inherent differences in production costs and production methods, distribution costs to local retailers as well as the application of Value Added Tax (VAT).

Furthermore, local production costs are about N$1.7 per litre higher than average production costs in South Africa. These low raw milk production costs are not achievable locally due to a prohibition on the use of synthetic milk induction hormones and antibiotics to increase the feed conversion ratio. “In addition, the production of local Genetically Modified Organisms (GMO) fodder is prohibited. Transport costs of UHT milk from the Western Cape to Namibia is cross-subsidised by around N$0.50 per litre. This comes as a result of a value cost allocation vs volume cost allocation practice applied by importers.

Chairperson of the Namibian Dairy Producers Organisation, Japie Engelbrecht, told Farmers Forum after the congress last week that the increase of 4.7 per cent was unavoidable in light of a string of increases since last year’s congress. “We instructed an independent consultant to conduct a milk value chain analysis earlier this year and the results clearly showed that both the Namibian producers and processors was in dire need of increased prices as their input prices have been rocketing since last year. Despite the fact that dairy products can now again be imported in greater volumes from South Africa, the increase to our local products was necessitated by increased wages, transport costs of raw materials and increased electricity tariffs,” he says.

Engelbrecht points out that out South African importers also find it hard to deliver on promises because of a general milk shortage in South Africa, something Namibia was also subjected to earlier this year when rows of empty milk shelves greeted consumers weeks on end at retailers all over the country.

He says there is new interest amongst farmers to become milk producers after the government showed its support for the local industry by going to court earlier this year in an effort to limit the amount of imported milk products from South Africa. “In light of government’s huge support, the local industry has to be supported by every Namibian to stimulate local producers and grow it into an industry that could become self-sustainable within years. The industry already plays a big role in job creation as it creates 15 jobs for every 100 tonnes of milk produced. This is tremendous when taken into consideration that in South Africa the same industry creates only 2.8 jobs for every 100 tonnes of milk produced. We should all be very proud of our small industry creating so many jobs,” he comments.

Engelbrecht stresses that quality and prices are of utmost importance in the fiercely contested market and that Namibians should insist on the best quality and prices. “Our industry has proved itself and stood the test of time and we have made great strides towards becoming bigger and better equipped for the future. Our producers are very positive about the future and there are even some new faces appearing on the horizon who wants to become active milk producers.”

He says it is also of great importance that Namibians learn to shop at those outlets that support the local dairy industry by selling their milk products at the right prices. “We have no control over the mark ups of retailers and super markets and can only suggest consumer prices. But we are aware of some outlets meeting the consumer halfway by selling milk to them at cost prices. These are the people we need to support as they are the ones delivering milk to thousands of households every day at the most affordable price.

“This is the kind of cooperation which will enable us to build our industry into something our children will be proud of one day,” Engelbrecht concludes.

Source : New Era