South Africa's dairy farmers have become so efficient that there is little left to cut, yet most still do not earn a worthwhile return, farmers told a Farmer's Weekly panel on dairy under pressure at the Royal Show in KwaZulu-Natal on 9 October.
Dairy farmer Tom Turner said the number of dairy farmers in the country had fallen from about 7,500 to 830 during his farming career, as producers were forced to grow and become more efficient. In a study group of 65 dairy farmers, only the top 20 percent consistently earned a return on capital above what the money would earn in the bank. "Most dairy farmers would be financially better off selling their operations and putting their money in the bank," he said, adding that the figures came from a good year.
Andrew Morphew, also a dairy farmer and spokesperson for FMD Response SA, described the squeeze through the price of diesel: in 2016 a farmer had to sell 1.49 litres of milk to buy a litre of diesel, and in 2026 it takes 3.6 litres. "We are putting more milk into a market that doesn't have the money to pay for it," he said, as population growth outpaces economic growth.
Turner said he must grow production by 5 to 10 percent a year just to stay ahead, but in a market that is not growing "I am effectively putting another farmer out of business". His farm measures feed intake, milk output and margin over feed cost every week; cutting concentrate by 2 kg and losing 4 litres of milk leaves a farmer worse off.
He questioned whether processors and retailers hold themselves to the same standards. "Farmers are residual price-takers: everyone else takes their share, and we receive what's left," he said. He estimated the industry spends less than 1 percent on dairy marketing, against the roughly 10 percent he believes big consumer goods firms should invest, and called for more marketing, product innovation and exports.
Turner said his operation supports about 3,000 livelihoods directly and indirectly, and that he spends 90 percent of each monthly milk cheque within 100 km of the farm within two days.
The report was written by Lindi Botha for Farmer's Weekly.
Source: Farmers Weekly South Africa
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