Consumers can expect the price of milk to rise over the coming months as supply drops, according to industry experts.
Tom Turner, a dairy farmer in Nottingham Road and the president of the Milk Producers’ Organisation of SA, has warned that high grain prices will put a strain on dairy farmers, and therefore the supply of milk, as it becomes more expensive to feed cows.
“We are going into dangerous territory,” he said.
“We would rather warn people early on.”
The dangerous territory that Turner refers to is the industry ratio used to measure the price of milk against the price of feeding cattle. Ideally the ratio of milk price to grain cost should be 1.16:1. At the moment the average price of milk sold by farmers is R3.40 a litre, whereas grain costs roughly R3.50 a kilogram.
Turner said this meant that farmers would feed their cattle less grain in an effort to curb costs, which meant cows would produce less milk.
“It is not an exact science, [but] as long as the price of grain remains where it is, there will be pressure on supply,” he said. “Based on the current grain price related to the milk price, we will be put under strain.”
The deputy chief executive of Clover, Manie Roode, said he acknowledged soaring grain costs for farmers, but there was also a seasonal element that played a part in the supply and price of milk.
“Milk flow has a seasonal dynamic, with the beginning of the year always showing a decline – it tapers off from January onwards,” he said.
Roode added that the price of milk could not be forecast.
“At the moment the price is stable, but we don’t know what will happen in the future and we will constantly reassess the situation.”
With grain constituting a large chunk of dairy farming expenses, the rising price of the staple has a direct correlation to the price of milk.
The chief economist at Grain SA, Wessel Lemmer, said that prices for yellow maize, which is used in animal feed, were up 10 percent from last year, at R2 500 a ton.
Lemmer said farmers should stock up on grain over the next two months because he expected the price to go up further after October. “They have a chance now to acquire sufficient stock, as we expect prices to increase,” he said.
