Responding to Newcastillian News, the South African Milk Processor’s Organization (SAMPRO) shed light on the rising prices of milk, offering valuable insights into the dairy industry. SAMPRO’s CEO, Alwyn Kraamwinkel, explains the factors driving the price changes and emphasises the importance of considering the erosion of consumers’ purchasing power.
Monitoring the retail sales quantities of nine dairy products reveals the following trends:
- In 2020, seven products experienced an increase ranging from 2.2% to 14.8%, while two products saw a decrease of 7.9% to 10.6% compared to 2019.
- In 2021, one product increased by 1.1%, while eight products decreased by 1.1% to 6.7% compared to 2020.
- In 2022, two products increased by 0.05% to 1.2%, while seven products decreased by 2.1% to 7.7% compared to 2021.
Kraamwinkel stated that the decline in retail sales quantities should be understood in the context of consumers’ purchasing power erosion, caused by high price increases, poor public sector service delivery, and weak economic growth.
SAMPRO also notes changes in unprocessed milk production in South Africa:
- In 2020, production was 0.16% lower than in 2019.
- In 2021, production was 0.71% lower than in 2020.
- In 2022, production was 1.56% lower than in 2021.
- In the first quarter of 2023, production was 3.12% lower than in the same quarter of 2022.
As a result, Kraamwinkel highlights the seasonal nature of milk production, with the lowest production occurring in June and the highest in November each year. On average, from 2009 to 2022, the difference between the highest and lowest production per day per month was 34.4%.
Furthermore, SAMPRO discusses the changes in prices of unprocessed milk and dairy products in South Africa.
Producer price indices of unprocessed milk and dairy products have witnessed increases in the past three years, with notable increases also seen in primary agricultural products and manufactured food products.
The retail prices of the monitored dairy products increased by 1.0% to 11.1% in 2020, 3.8% to 10.1% in 2021, and 6.7% to 13.2% in 2022.
According to SAMPRO, these price increases were driven by the necessity to maintain supply, as demand did not increase. Such increases have prevented a significant decline in the production capacity of the South African dairy industry.
However, SAMPRO advises caution, stating that production costs may decrease in the coming months, but factors like high levels of load shedding and weather conditions (including the anticipated return of the El Niño phenomenon) can impact production costs and milk production.
Therefore, Kraamwinkel suggests that the full impact of recent price increases on milk supply and demand will become evident in the coming months. He acknowledges the uncertainty surrounding the future performance of the dairy industry and emphasises the importance of frequent assessment to ensure that supply meets demand.
In conclusion, the rising milk prices and various influencing factors warrant a thorough examination of the future of South Africa’s dairy industry. We invite readers to share their thoughts on the matter in the comment section below.