Global dairy surpluses are placing big pressures on South African farmers who are blaming their European counterparts for ‘going mad’ in the post-milk quota world. By Chris McCullough.
Dairy farmers in South Africa are blaming EU farmers for flooding world markets with unwanted dairy produce.
And Irish farmers, too, have been criticised for ‘losing control of their own destiny’ by increasing production once the milk quota system ended in 2015.
I visited a number of dairy farms across South Africa last week and all of them blamed farmers in Europe for ‘going mad’ when the shackles of the milk quota system were lifted.
Melt Loubser is the chief executive officer of Fair Cape Dairies near Cape Town and a director of Milk SA.
He said the glut of milk dumped on world markets hurt global prices, and even though South Africa is a net importer of dairy produce, the price depression hit their own export businesses badly.
Speaking on the family farm near Cape Town, Melt said it was fairly obvious who the culprits were when it came to overproducing.
He said: «The Irish made many claims of how they were going to increase their production once the quota system ended and that is what they did.
«There was a lot of oversupply which had nowhere to go. In the end this was just dumped into EU intervention which depleted world prices.
«South Africa exports dairy produce as well but is a net importer. With cheap imports coming into the country there is no way we can compete on a national basis.
«Our prices fell and with so many farmers leaving the dairy industry it is concerning to see where it will end up,» he added.
Along with his four brothers Melt operates Fair Cape Dairies which currently produces 70m litres of milk per year from 2,500 Holstein, Ayrshire and Jersey cows.
The cows are milked three times per day with the Holsteins averaging 40 litres per day; Ayrshires averaging 50 litres per day and the Jerseys averaging 22 litres per day.
Cows are kept indoors all year long in cool sheds to reduce the heat stress and are walked to the 64 point rotary parlour at milking times.
Fly across the country to Pretoria and the Bosparadys Farm is run by the Khourie family consisting of William and his sons Joe, Anthony and Pieter, who all take charge of the various different enterprises.
Dairying is the dominant enterprise accounting for 80pc of the total farm income but the Khourie’s also farm with sheep, pigs, hens, goats and game.
The Khourie family have farmed there for over 20 years and have built up a profitable business with an annual turnover of just under R200m (€14m).
The family own a total of 2,000 hectares and rent a further 500 hectares from a local landowner.
Around 400 hectares of this land is planted out in grasses and 1,100 hectares is used to produce maize silage averaging 14 tonnes per hectare. The remainder is natural land used for game farming.
Anthony Khourie is in charge of feed planning and production, and runs a stable feed bank that provides the fodder flow for continuous dairy production. Joe manages the dairy herd and the heifer herd while Pieter is the overall marketing manager for the farm.
Bosparadys Farm milks 800 cows with an average yield of 30 litres per cow per day but they have a high yielding batch of 250 cows producing 40 litres per day. The high yielders are milked three times per day in the 14/28 herringbone milking parlour while the rest are milked twice per day.
The farm currently averages milk quality of 3.3pc Protein and 3.6pc Butterfat which is quite important as they bottle their own milk and produce yoghurt, cheese and buttermilk on site as well.
In total, the farm’s daily production of 24,000 litres is used in their on-site factory together with an additional 26,000 litres that are bought in each day from a local supply network of 12 other dairy farmers.
In terms of other dairy livestock there are 200 dry cows, 150 in calf heifers aged up to two years old and 420 young heifers from birth to 15 months old.
The older cows are inseminated by Dutch sires via AI and the younger heifers all run with groups of young Holstein bulls.
Of the total output, liquid bottled milk accounts for 85pc while 12pc is made into buttermilk and 3pc for yoghurts and cheese.
The business operates its own fleet of delivery trucks that deliver the milk to a network of 200 shops and supermarkets up to a 150kms radius of the home farm.
Milk is most popular with customers when sold in two litre containers which sell in the shops for around R25 (€1.74). The farmer, also being the processor, receives R10 (€0.70) per litre for the milk and his cost of production is R4 (€0.28) per litre.
The dairy cows are kept outdoors in corals and are fed according to yield with the majority being fed to produce 30 litres per day,
Cows are fed 38.9kgs of a Total Mixed Ration per day using the farm’s feed mixers. The ration contains 2.3kgs grass, 6.7kgs brewers grain, 17.7kgs of maize silage, 6.3kgs of a 28pc High Protein Content supplement and 5.9kgs of maize meal. This ration costs R69.34 (€4.83) per cow per day and equates to a feed cost per litre of R2.72 (€0.19).
The Khourie family employs 250 staff which work in all the sectors on the farm. The dairy factory operates on two shifts almost 24 hours per day and a more relaxed timetable at the weekend.
Aside the dairy enterprise the farm also runs 22,000 hens, 100 pigs, 1,000 ewes, 300 goats, a tourist holiday park and a game farm.
Just over 1,000 Suffolk ewes are run on the farm producing lambs which are sold for meat. All the ewes lamb outdoors with a respectable lambing percentage of 150pc.
Pigs are kept on the farm primarily to feed on the returns of milk produce from the retail outlets which currently accounts for 2pc of the total output.
From 50,000 dairy farmers in 1997 to just 1,600 today
In a country where no subsidy is paid to farmers for producing milk they are under a growing strain to make a profit while trying to keep costs to a minimum.
Two decades ago there were around 50,000 dairy farmers in South Africa but today there are only 1,600 of them left.
Naturally with a decrease in overall numbers, there has been a sharp rise in the national average herd size which now stands at just over 350.
There are only around two per cent of the herds in the country that have thousands of cows in the herd and the national dairy herd size stands at 1.6m animals.
Holstein, Ayrshire and Jersey breeds are used throughout South Africa producing average yields of 29 litres, 22.4 litres and 19.3 litres respectively. Raw milk sales in 2014 were on average 250m litres per month.
Profit on all of these farms is controlled by a number of factors which can fluctuate from month to month.
These include currency changes but more crucially weather factors and the availability of rain and therefore fodder.
It is now a common trend for dairy farms to excel in the maritime regions while decreasing in the centre of the country due to the access to water.