Impact of External Factors on the Dairy Industry and Strategies for Adaptation
The dairy industry faces severe impacts from external factors like Russia's invasion of Ukraine, supply chain disruptions, and global economic decline. Competition intensifies as weaker competitors exit the market. To navigate these challenges, an agile industry organization like Milk SA monitors risks and influences key institutions. However, limitations in government support and transformations hinder industry negotiations for better product prices.
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CEO Report to the Members At the General Meeting of 30 November 2022
EXTERNAL FACTORS IMPACTING SEVERELY EXTERNAL FACTORS IMPACTING SEVERELY ON THE INDUSTRY ON THE INDUSTRY Russia s invasion of Ukraine: Higher input prices: crude oil, fuel, fertilizers, agro-chemicals Higher animal feed prices International trade restrictions Supply chain disruptions Higher food prices, especially sunflower oil, maize and wheat products Global food prices surged 65% since the start of Covid, and by 12% this year alone since the Russian invasion (UN s FAO). Consumer behaviour / spent (less discretionary spending) Weakening China economy (the zero covid policy) Eskom s failure Foot-and-mouth
World World- -wide economic decline wide economic decline Real GDP: annual percent change 2021 2022 5.2 2.4 6.6 3.7 2023 1.1 3.7 Advanced economies Emerging Market and Developing Economies United States 5.7 1.6 1.0 Euro area 5.2 3.1 0.5 United Kingdom 7.4 3.6 0.3 Russia 4.7 -3.4 -2.3 South Africa 4.9 2.1 1.1
Competition in the market becomes tenser Competition in the market becomes tenser Each time the bar is raised, weaker competitors fall out. Since Jan 2015 to Jan 2022: 850 producers of raw milk left (-46%); and 24 processors left (-15%); and 43 PD s left (-39%) Production of raw milk increased by 7,3% In 2016, dairy entrepreneurs and organized labour sought relief through NEDLAC. However, it appeared that Government s failure was the biggest limiting factor for fair competition & confirmed by AAMP
An agile Industry Organization An agile Industry Organization Constant monitoring by Milk SA of the external environment and its agility to respond and influence the relevant public and other institutions, are some of the critical functions of an industry body like Milk SA Dashboard to monitor risks to the SA dairy industry, such as: Maladministration with export certification Food safety scares Ineffective response to animal diseases A lack of government support with transformation Consumer perceptions
A can A can- -do Industry organization do Industry organization Milk SA cannot negotiate better product prices or prevent competitor products from entering the markets, but Milk SA can: Facilitate better product quality and safety; Produce reliable industry information; Influence consumer behaviour; Advise Government on trade protocols; Address industry challenges through research; Assist existing black dairy entrepreneurs on their journey to commercialization; Promote actions to ensure a more sustainable environment; Facilitate the most relevant learning dispensations through the SETAs; Defend and promote the SA s dairy industry position at any Government level and on any other platform nationally and internationally; Be a member of the international dairy community, sharing scientific knowledge with 53 other countries. Take hands in the NAHF to improve animal health.
A tribute to the stalwarts A tribute to the stalwarts Each project manager - an expert in his / her field - is not a clock-watcher, but a scoreboard watcher. We respect them for their selfless service to Milk SA and the dairy industry. Other persons with expertise also serve on Milk SA s structures for many years. The Milk SA Board decided to reward selected persons for their exemplary service to the dairy industry, during the next General Meeting in June 2023.
Administration Administration As Administrator of the statutory regulations, Milk SA is proud to say that it fulfils its duties excellently since 2006 Monthly return forms of processors buying 88% of the raw milk is submitted within 15 days after month-end. Current debtors' book is the healthiest that it ever had been. In the past 16 years, levy income exceeded the budget 12 times. For the sixteen years 2006 to 2021, the budget was R615 mil and income R642 mil. (+4,4%)
Communication Communication INFORMATION PRODUCTS 1 Dairy Digits 2 Lacto Data 3 Quarterly Review of the Performance of the Dairy Industry 4 Report on the historical SAFEX prices as well as the future SAFEX prices of yellow maize and soybeans 5 Trends of the retail sales of dairy and other generally used food products 6 Competitiveness of the South African primary dairy industry (IFCN) 7 Analysis of imports and exports of dairy products MPO report to Milk SA regarding its responsibilities in terms of the statutory measures by virtue of the Marketing of Agricultural Products Act of 1996 (Act No 47 of 1996) 8 9 Milk purchase trends flyer 10 The World Dairy Situation 11 12 PowerPoint presentations to the members of Milk SA at their General Meetings Popular project reports 13 Annual Report of Milk SA 14 Milk Essay 15 The Research Column 16 17 18 Dairy R&D in South Africa Annual Reports to the National Agricultural Marketing Council Four-yearly reports to the National Agricultural Marketing Council
2023 Budget 2023 Budget Rand % of income NET INCOME 66 202 912 TOTAL EXPENSES 66 202 912 Administration costs 6 341 387 09,58 Project expenses 56 182 659 84,86 Research & Development 3 956 009 05,98 Industry Information 3 558 840 05,38 Dairy Quality & Safety 11 455 523 17,30 Consumer Education 22 391 459 33,82 Transformation 13 240 582 20,00 Skills & Knowledge Development 1 580 246 02,39 Milk SA Staff remuneration allocated to projects 1 987 730 03,00 Communication (incl. liaison, Annual Report, Milk Essay, Ind book) 1 580 000 02,39 Internal Audits 171 136 00,26 SURPLUS / DEFICIT -60 000 -0,09
Conclusion Conclusion 20 years since its establishment, Milk SA has grown immensely in form and output. The projects of Milk SA have a firm grip on its portfolios, having direct linkages with all relevant national and international institutions. It is reassuring to see that the vision, mission and strategic intent of Milk SA which were defined 20 years ago, has brought us this far. It is also reassuring to see the industry leaders of 20 years ago, still carrying the flag of Milk SA.
