From time to time, the reduction in the number of producers of unprocessed milk in South Africa (SA), is the subject of articles in the news media. The reduction of producers of unprocessed milk in SA should be viewed in the context of the reduction of producers in other major dairy-producing countries. Although the number of producers of unprocessed milk is reducing, the production of unprocessed milk is increasing across major dairy-producing countries in the world.
This can clearly be seen in Table 1, which provides information on countries in which the bulk of the unprocessed milk is used to produce processed milk and to manufacture other dairy products. In each of the 25 countries listed, the number of producers of unprocessed milk decreased.
Table 1: Reduction of the number of dairy farms in particular countries.
|Country||Ranking||Percentage of production processed||Number of farms (‘000)||Percentage reduction of number of dairy farms 1996 to 2018||Percentage increase in production 1996 to 2018|
|EU||2||93||4 836||1 139||76,45||12,27|
The producer decreases in ten countries (40% of the countries) were more than 70%. The decreases in 17 countries (68% of the countries) were higher than 50%. The decreases in 21 countries (84% of the countries) were 40% or higher.
Increase in production figures
Notwithstanding the decrease in the number of producers, the production of 22 of the 25 countries (88% of the countries) increased. The increases in four of the 22 countries (18,1% of the 22 countries) were more than 70%. The increases in seven of the 22 countries (33,3% of the 22 countries) were higher than 50%. The increases in eight of the 22 countries (38% of the 22 countries) were more than 40%. The increases in 15 of the 22 countries (68% of the 22 countries) were more than 20%.
Another important observation in respect of the information contained in Table 1 is that the reduction of the number of producers of unprocessed milk not only occurred in SA, in which the structure of the dairy industry (number of producers and market shares of each) is shaped by market forces. The reduction also occurred in countries in which the dairy industries are regulated.
In the case of Canada, comprehensive measures exist. These measures include price control and production quotas in respect of unprocessed milk as well as high protection against imports, which are, among other things, aimed at maintaining the structure of the unprocessed milk industry. Also, the price of unprocessed milk in Canada is substantially higher than in the United States (US) and in other major dairy countries.
These measures and the high price of unprocessed milk in Canada did not prevent a reduction of 54,46% in the number of producers of unprocessed milk in Canada. According to the Dairy Report 2020 of the International Fact-Checking Network, the ‘farm gate’ price of unprocessed milk in Canada was 69% higher than the ‘world market price’ in 2019. The figures for some other countries were as follows: US – 14%, European Union – 3%, France – 11% and Germany – 3%.
The reduction of the number of producers of unprocessed milk also occurred in countries in which co-operatives, of which the producers of unprocessed milk are the members, are major producers of processed milk and manufacturers of other dairy products.
The existence of co-operatives integrates the business interests of the entities which produce unprocessed milk (farmers), entities responsible to produce processed milk and the entities which manufacture the other dairy products (processors). The implication of this position is that the producers of unprocessed milk have significant bargaining power in respect of, among other things, the price of unprocessed milk, and that this bargaining power did not prevent the decrease in the number of producers of unprocessed milk in the countries concerned.
The decrease in the number of producers of unprocessed milk in SA is the fourth highest of the 25 countries, while the increase in the production of unprocessed milk in SA is the fourth highest of the 22 countries in which the production increased. – Press release, SAMPRO