Milk tag

The introduction of a special “temporary” drought relief payment of five cents a litre to dairy farmers from 1 August to 30 November to assist them through “this difficult time” should be a warning to consumers that another price increase is imminent.

Although the Dairy Marketing Board says this payment was not passed on to the consumer, the recent increase in the price of stockfeed and the fact that such stockfeeds may have to be imported until June next year, coupled with the fact that the DMB itself is trying to clear off its deficits, could in the end result in consumer price increases of anything up to 50 percent as recently happened with maize meal and bread.

Already, according to the DMB, whole milk has a subsidised consumer price of 10 cents a litre. With a deficit of only $7 million from last year’s $57 million, there may be a strong temptation on the DMB to wipe off its deficit and even start trading at a profit.

Although it says it is very conscious of the pressures on the consumer’s dollar and has tried to contain prices within reasonable bounds, the parastatal also notes that it has to maintain dairy farmers’ viability and reduce consumer subsidies and thus its deficits.

Moreover, the dairy farmers believe producer prices have been kept too low for a long period and would like price adjustments every three to four months to keep in step with inflation now put at 35 percent.

The only thing that may keep prices reasonable is possible consumer resistance which has reduced demand by 25 percent. But the need for foreign currency to buy much needed equipment and spares could take the upper hand and force the parastatal to export rather than worry about local demand as there will, on the books, be a surplus.

Moreover, although the DMB may have succeeded in cutting down its deficits and the government is now more prompt in paying monies owed to the parastatal in subsidies it still owes the government a lot of money on long term loans for which it has to pay interest. The next goal may be to reduce these long term loans.

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