Equity-drained dairy producers raise red flag about rising costs

WINDHOEK - Total production costs of dairy producers have increased by more than 55 percent over the past year compared to their income, which has dropped due to producer price cuts of 30 cents per litre of milk.

During the Dairy Producers' Association (DPA) management meeting last week, the dairy production cost index was submitted, clearly showing that the biggest contributing factor is feeding cost, and Feedmaster has just announced that feeding prices will rise again by the end of February. Although dairy producers have already applied all possible cost savings in their businesses, the costs are simply too high and there is zero profitability. The DPA management has seriously requested Namibian Dairies for a price reduction. However, the recovery of the above-mentioned producer price is still not enough to close the gap in the cost squeeze and, as a result, there must be urgent discussions on additional price increases.

The implementation of the milk and related products import and export control act in support of the local dairy industry is still not in place and is a major frustration. It is critically important that this legislation should come into effect as soon as possible.

Meanwhile, the DPA has called for the retail sector to support locally produced products. The continued lows have Namibia's handful dairy producers eating into their equity, and looking for any way they can to reduce inputs and increase their profit margin. Dairy policy experts and farmers agree that the over-arching problem is supply and demand. There is simply more milk on the market than there is consumption due to cheaper imports from South Africa.

If the long-awaited bill to regulate the import and export of dairy and dairy products - due to be tabled in Parliament soon - is not given the green light, it could spell disaster for Namibia's small dairy producers' society. The country's 16 dairy producers and the entire dairy industry are in dire straits. This critical situation in the dairy industry can be ascribed to mostly the influx of cheap UHT milk and other closely related dairy products into Namibia. Sometimes, imported UHT milk, mostly from SA, was selling on shelves of Namibian retailers for as low as N$10.99 per litre. Milk volumes produced on Namibian farms are now some five percent lower than five years ago.

This, coupled with the unfortunate challenging economic times faced by the world today, which put immense pressure on disposable income, has resulted in significant revenue cuts in the local industry, seeing a 15 percent decline in the use of fresh milk and UHT recently.

This economic dip makes resources scarce, thus resulting in the upscale of prices and in return increasing the cost of production. This is not just a milk thing. The pressure is on everyone. Maize prices are affected by the lack of rainfall, and we can also expect an increase in fuel/oil prices going forward, the managing director of Namibia Dairies, Gunther Ling, was quoted saying.

Namibia's only long-life milk production plant, which belongs to the Ohlthaver & List Group, could face closure if the trend continues, resulting in almost 500 job losses. If the UHT plant shuts down, it would result in cutting down the 1.7 million litres received from milk farms per month to only 700 000 litres, which would increase the price of milk for the average consumer


Source: New Era Newspaper Namibia