Dairy sector in crisis

The dairy industry found itself in the middle of a severe crisis from 2020 to 2021, caused by factors such as competing with cheaper imports, skyrocketing fodder costs, the Covid-19 pandemic and the accompanying weak economic situation.

This is according to the Namibia Agricultural Union’s annual report for 2020 to 2021, which says that a lack of governmental support has resulted in dairy farmers leaving the industry at an alarming rate.

This has further caused a decrease in raw milk production, and thus a critically low supply of milk to the processor.

“Although good rains were received across the country and there was plenty of lucerne available, the cost of additional inputs required to boost milk production unfortunately remained high, thus negatively affecting milk volumes.”

It pointed out that the dairy sector is cost intensive and 71% of the production costs is feed.

“It is evident that the drastic decline in raw milk volumes started in 2020, and this is attributable to the current crisis that the sector is in.”

Pandemic

The Covid-19 pandemic continued to take its toll on the agricultural sector as whole.

“Increasing feed costs continued to negatively affect producers, and in this Covid-19 era it has been identified that Namibia, being a net importer, can no longer safely rely on imports. This is due to trade wars; some countries opt to satisfy their home needs and only export the surplus.”

The report noted that this practice has also had an impact on the rise in commodity prices.

It says that over the years, the dairy industry has been limping, but through collective and collaborative efforts of all stakeholders the industry has strived to remain relevant.

“There was good progress on the 2020 proposed bill governing the control of the importation and exportation of dairy products and dairy product substitutes. The legislation was passed by the National Assembly in March 2020, thereafter by the National Council with amendments in June, however, the process came to a halt and to date the envisaged bill has not yet been finalised.”

According to the report the current situation is that the crisis “is out of control and the possibility of the dairy industry facing total extinction is a reality, therefore, serious intervention is still needed at all levels.”

The Dairy Producers Association’s financial position for the 2020/2021 fiscal year concluded with a deficit of N$158 775.

At the end of last year, agriculture minister Calle Schlettwein said that relevant ministries and offices would consult on the implications of restricting imported dairy products.

Among the short-term measures to rescue the struggling industry, as recommended by a task team assembled to investigate challenges presented by the Dairy Producers Association of Namibia (DPA) and formulate recommendations to rescue the industry, was the introduction of a government subsidy of N$2 per litre of raw milk.

"This could have assisted to cover the utility costs incurred by the producers by stimulating investment by dairy producers to increase production. However, due to limited funding, this proposal could not be implemented. It needed a total amount of about N$40 million,” Schlettwein said at that time.