Dairy industry needs urgent intervention

Fast-increasing input costs, along with constant producer prices, have squeezed dairy producers’ profit margin, leading to some farmers ceasing operations.

15 December 2021 | Agriculture

ELLANIE SMIT

WINDHOEK

The supply of raw milk is expected to drop from 24.4 million litres produced in 2015 to a mere 15 million litres this year, calling for urgent intervention in the dairy industry.

Fast-increasing input costs, along with constant producer prices, have squeezed dairy producers’ profit margin, leading to some farmers ceasing operations.

The impact has been a decrease in the supply of raw milk from 24.4 million litres in 2015 to 17.2 million litres in 2020, showing a significant reduction of 29.3%.

According to the Namibia Agricultural Union (NAU), a further drop to 15 million litres (12.9% year-on-year) is expected for the year 2021.

It says support measures that were previously implemented by the government did not prevent the importation of dairy products into Namibia, but rather stabilised producer prices.

This led to a growth in raw milk supply and more employment creation, the union says.

These measures were implemented from 2003 to 2011 and again between September 2013 and August 2014.

The NAU says the domestic dairy sector is small and highly impacted by factors such as climate and high feed and production costs. Therefore, the lapsing of these protective measures left the sector more vulnerable.

Not profitable

“From 2015 to 2020 feed costs increased by 18.3% and fuel prices by 9.3%, while the weighted total expenses grew by 15.3%.”

Despite these increases, producer prices increased on average from 4.8% from 2015 to 2020, says the NAU.

“Producer prices remained constant from the second quarter of 2016 to the third quarter of 2021, displaying an average price of N$6.1 per litre, which is below producers’ break-even margin estimated at N$7.70 per litre in 2020.”

The NAU points out that the ten producers who are still in production have 150 employees, supporting 597 dependants.

It added that between 2016 to 2020 producers had an estimated production value of about N$123 million.

“Dairy producers in turn support lucerne farmers, transporters, input suppliers, banks and contribute to government revenue.”

Hence, the union says that immediate intervention is required to prevent anticipated job losses and exposing consumers to highly volatile prices, which are expected to affect low-income households the most.

[email protected]

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