Why Dairy Farm Closures Could Push Up Milk Prices

South African consumers may face higher milk prices in the long term as rising production costs and lower prices paid to farmers threaten the survival of local dairy farms.

André van Heerden, chief executive of dairy co-operative Samilco, said Lactalis, a major international dairy group operating in South Africa, had cut the price it pays farmers by 70 cents a litre — a reduction of about 10%.

Farmers were already under pressure from rising fuel, energy and other production costs. Many, especially smaller and medium-sized producers in the Southern Cape, are now struggling to remain profitable.

“I presume most of these guys are running at a loss, especially when it’s a 70 cents reduction, which is a 10% reduction that you just can’t afford anymore,” Van Heerden said.

He noted that the number of dairy parlours across the country has dropped significantly over the past decade, from more than 200 to about 144.

Van Heerden argued that remaining farmers have already maximised efficiency and have little room left to absorb further cost pressure. He warned that those who can no longer make dairy production viable may be forced to close that part of their operations and switch to other farming activities.

The loss of some export contracts, particularly in markets such as Saudi Arabia, has added to the strain. Van Heerden described the resulting situation as a “fake surplus” of milk rather than a normal oversupply.

If more local farms close, South Africa could become more reliant on imported dairy products, which may ultimately push up prices for consumers.

https://iol.co.za/business/2026-10-20-why-dairy-farm-closures-could-push-up-milk-prices/

IOL – Why dairy farm closures could push up milk prices (Mthobisi Nozulela)

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