Preliminary figures indicate that milk supply in February reduced by 3,45% compared to the same month last year. Growth in milk supply in February is substantially lower than in the same month for the previous three years. Similarly, the growth in milk supply in January of (-0,38 %) was significantly lower (6,55%) than in January of last year.
To put low milk production in February in perspective, the 8,5% production growth in February last year was at extraordinarily high levels compared to that of 2017. If, for example, we compare production for February 2017 with February this year, milk production grew by 4,7 %.
Notwithstanding the above, it is clear that milk production has been under pressure since the end of last year with the following factors setting the trend: the producer price on average fell by 19% since January last year and the yellow maize price this January averaged R 2 731/ton. This means that compared to last January, yellow maize was 41% more expensive. This cost component weighs heavily on the economy of milk production while the drought, the late rain over large parts of the country, and the abnormally high temperatures also played a role. The high levels of insufficient electricity supply and the increased electricity tariffs could further impact negatively on milk production.
Rain has fallen over some of the drought-stricken areas and some milk buyers have announced price increases from 1 March. These events would moderately support milk production and the strong growth in milk supply experienced last year (year on year growth 4.82%) should be sufficient to satisfy the demand for milk for the next couple of months.
Producer price increases that were announced varied between zero and 20% based on the average producer price. It is of concern to the MPO that certain milk buyers have not yet announced a producer price increase. The MPO is of the opinion that producers who have not yet received a price increase are not being treated reasonably especially in light of the coming winter and the difficult weather circumstances of the previous season. The MPO appeals to the milk buyers involved to familiarise themselves with the situation in the industry and act responsibly. The same applies to price increases in the lower range of the above-mentioned percentages.
The impact of the drought and high grain prices will in the coming months cause further upward pressure on producer prices. – MPO