The South African dairy industry is in the middle of a major change. In 2016, new dairy regulation R260 was introduced by the Department of Agriculture, Forestry, and Fisheries. The new regulation requires ingredient lists, best-by dates, and batch codes on all dairy packaging.
That has created issues with fat content labeling, which has essentially created a new “medium fat” dairy category for the market.
These regulations were put into place to support continued growth within the dairy industry. It’s the fifth-largest agricultural industry in South Africa, where milk is produced daily to provide a regular income for many producers, both large and small. Recent upgrades in production equipment have helped to push added value to the industry, though it has also created a demand for high-skill workers that are committed to the work.
Commercial dairy farming and non-commercial, small family farms, are both part of this industry. Since 1997, however, the number of small producers has declined because there are no longer control boards which offer production and marketing assistance.
Important South African Dairy Industry Statistics
#1. Parmalat is the leading producer of cheese products in South Africa, with a 29% market share of sales in 2017. Dairybell came in second, with a 15% market share. (Euromonitor)
#2. Clover holds the greatest market share when looking at fresh milk products, responsible for 30% of industry sales in 2017. That’s a 1% reduction in market share from 2016 figures. (Euromonitor)
#3. About 48% of consumers in South Africa purchase an ESL or pasteurized milk product on a regular basis, compared to the 40% of consumers who prefer sterilized or UHT milk. (Milk South Africa)
#4. The most popular dairy product sold in South Africa is yogurt, with 82.5% of households reporting regular consumption. 80% of household purchase maas, while 63% of consumers purchase cream cheese. (Milk South Africa)
#5. Danone is the leading provider of sour milk products, including yogurt, in South Africa. 42% of sales within this product niche are of this brand. (Euromonitor)
#6. A dairy farm requires at least 100 cows to be a sustainable contributor to the South African dairy industry. Farms with fewer cows still produce milk, but struggle with profitability. (Milk South Africa)
#7. South Africa currently has a total cattle population of 14 million head. That represents 0.95% of the global cattle population, placing the country 21st in the world. (Drovers)
#8. Holsteins are the most popular cows at South African dairy farms. The number of dairy farmers operating in the industry has dropped, however, from 50,000 in 1997 to just 1,600 in 2017. (Farm Ireland)
#9. Holsteins on South African dairy farms can average about 29 liters per day. Ayrshires average about 22.4 liters per day, while Jerseys average about 19.3 liters per day. The cows must be milked 2-3 times per day. (Farm Ireland)
#10. Milk is usually sold in 2-liter containers in South Africa, retailing for about R25 per container. Farmers receive about R10 per liter if they also act as the processor. (Farm Ireland)
#11. The average cost of production for a dairy farmer in South Africa is R4 per liter of milk. (Farm Ireland)
#12. For the South African dairy industry, the average herd size for a farmer in the country now stands at 350. Just 2% of the herds in the country have more than 1,000 head. (Farm Ireland)
#13. About 250 million liters of raw milk are sold per month, although the sales figure has not been updated since 2014. (Farm Ireland)
#14. Dairy cattle numbers have been declining in South Africa since 1969, when a peak of more than 2.4 million cattle composed the population. (Index Mundi)
#15. About 50% of the milk produced in South Africa is produced in either the Eastern or Western Cape. About 25% is produced around KwaZulu-Natal. (Agri Benchmark)
#16. Around 50% of the milk that is produced by the dairy industry in South Africa comes from farms that deliver more than 5,000 liters of milk per day. The average farm in the country produces about 3,700 liters of milk daily. (Agri Benchmark)
#17. 44% of all farms in South Africa have more than 200 cows. The average herd size in the Eastern Cape is more than 500 cows, while in KwaZulu-Natal, it is more than 420 cows. (Agri Benchmark)
#18. Cows in South Africa produce more milk seasonally, with 40% more milk available between September thru November. The lowest milk yields occur between April and July. (Agri Benchmark)
#19. 98% of the milk that is produced by the South Africa dairy industry is sold to formal markets. 40% of the milk goes into cheese products, with hard cheeses the primary product produced. (Agri Benchmark)
#20. The average walking distance for a cow in South Africa to find the food they require is about 1.5 kilometers one way. The longest distance for fresh food on documented dairy farms was 2.7 kilometers one way from the parlor. (Agri Benchmark)
#21. Just 20% of the acres that are available for pasture in South Africa are irrigated. (Agri Benchmark)
#22. Clover currently provides a milk price of R3.5 per kilogram, with bonuses in place for higher protein and fat content. Bonuses are also paid to farms that produce higher quantities of milk. (Agri Benchmark)
#23. Calf mortality is below 3% on dairy farms which implement calf separations for as long as possible. Most calves will stay about 7-8 weeks on milk before being moved to feed. (Agri Benchmark)
South African Dairy Industry Trends and Analysis
With the new regulations in force, some businesses may find temporary reductions in consumer preference as ingredients and labeling become an emphasis in marketing. Look for some products, such as yogurt and coffee whiteners, to push the industry forward in coming years.
Assuming all economic conditions remain stable, a CAGR of 3% is forecast for the South African dairy industry through 2022. The largest gains will be seen in the fresh and sour milk categories, while prepackaged cheese products may continue to see reductions in demand.
Economic conditions have been unfavorable for dairy farmers, especially with cheaper milk products coming from Europe. With a large dump of dairy products hitting the global export market, South African farmers have found it difficult to stay competitive with their higher cost profile.
At the same time, European markets have decreased regulations, while South Africa has increased them, creating another pain point for the industry.
Look for even fewer farmers staying within the dairy industry through 2023, though the average herd size will likely increase. That should keep the value of the industry somewhat stable, although finding profit growth may be difficult in the coming years.