By Andre Janse van Vuuren
(Bloomberg) — South African milk farmers are scaling back output as lower prices and higher feed costs render some production unprofitable, while an industry body warned that the worst drought on record and grazing shortages will fuel further cutbacks.
While purchases of unprocessed milk from producers rose 5.5 percent to 3.1 billion kilograms (6.8 billion pounds) in 2015 from a year earlier, they dropped 3.5 percent for December, Milk SA, which represents farmers and processors, said in a statement on its website.
A “decrease in producer prices in 2015 and the sharp increase in grain prices, the extreme hot and dry conditions during December and the current and projected scarcity of roughage” are the main reasons for monthly decline, the Milk Producers Organisation, based in the capital, Pretoria, said in a statement on its website. “Further decreases in milk production are expected for coming months.”
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Milk farmers have seen their grazing scorched by South Africa’s worst drought on record which also fueled prices for yellow corn, used as an animal feed, by two-thirds in 2015. The dry weather is also causing shortages and price increases for substitute feeds such as alfalfa, also known as lucerne, further eroding producers’ margins.
Average prices for alfalfa have risen by a third in a year, according to Bester Feed & Grain (Pty) Ltd., a Stellenbosch, South Africa-based agricultural trading company.
