Moderately positive outlook for the dairy industry

The outlook for the dairy industry, both internationally and nationally, is moderately positive. The Bureau for Food and Agricultural Policy (BFAP) at the University of Pretoria recently published their 2016–2025 agricultural outlook. Internationally dairy product prices are expected to improve as production adjusts to lower producer prices. In the longer term, a firm growth in the demand for dairy products is expected, especially in developing countries. In South Africa, the milk: feed price ratio is currently at its lowest level since 2007. For the next ten years, an increase in milk producer prices of about 5% a year is expected. This is favourable, especially as grain prices are expected to increase very little, thus improving the milk: feed price ratio further.

According to MPO economist Dr Koos Coetzee, the outlook seems reasonable. However, he predicts a sharper increase in producer prices in 2016 and early 2017 as processors position themselves for a higher growth in demand locally.