South African dairy market outlook 2017

South African producers had a hard time during the recent drought, the worst in many years. Total milk production in 2016 is estimated at 1,4% less than in 2015. In 2016 67 514 tonnes of dairy products were imported, 14% less than in 2015 but only 3% less on a milk-equivalent basis. UHT imports decreased from 28 million litres in 2015 to 19 million litres in 2016. Exports decreased by 7%. The total dairy supply (milk production plus import less export in 2015 and 2016) is compared in Table 1.

Table 1: Total milk supply, 2015 and 2016 (Mil.L.)

Table 1 shows that the total milk supply in 2016 was equal to the total supply in 2015. The Nielsen figures to September 2016 show positive market growth in all categories, with the exception of the liquid milk category. However, the fast growth of the UHT segment resulted in the positive growth of the liquid milk sector.

No supply growth in 2016, positive demand growth and higher import prices will put pressure on local processors. Production conditions have improved greatly since 2016. Grain prices are still high and will only decrease once the new season’s grain reaches the market. At present, the milk: provides feed price ratio is still not at a level that encourages production growth. Production growth will only result if producer prices are increased. High beef prices also make dairy farming less attractive than beef farm provides a ready market for cull cows.

Published on Mon, 13th Feb 2017 - 09:04