REPORTS of milk shortages surfaced last month, with Zimbabwe Association of Dairy Farmers (ZADF) chairperson Kudzai Chirima telling Standardbusiness that the country could be forced to import milk to bridge the gap.
One month on, shortages continue to haunt consumers as prices rise.
Last week, the Confederation of Zimbabwe Retailers also raised the red flag over milk shortages.
On Friday, our business reporter Melody Chikono (MC) spoke Chirima (KC) boss to understand the scale of the crisis that Zimbabwe faces and what the future is. Below are excerpts from their discussion...
MC: Take us through the problems affecting the dairy sector in Zimbabwe.
KC:Â There are several problems in the dairy sector, which have resulted in the reduction of milk on the shelf.
These include the cost of feeding cows, the cost of maintaining the herd and the cost of making sure that farm operations support dairy cows.
So, farmers are producing milk, but they are not getting good returns out of their investments because of high costs.
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We are hoping that with the bumper harvest this year, farmers will be able to feed their cows by producing feed on their farms to mitigate the cost of feeding dairy cows. If you feed cows much less food, they also produce less milk.
We are also having challenges in the way milk is being paid for.
About 90% of the payment comes through the RTGS (Real Time Gross Settlement System).
Only 10% is paid in United States dollars.
It is that money (the 10%) that the farmers have to use to buy diesel, which is sold in hard currency. As I have said, farmers are getting most of their money in the local currency. Drugs for livestock are also sold in US dollars.
These are some of the challenges that we are facing today. We are now moving on to the challenge of labour as workers are now going into mining where they are paid in foreign currency.
MC: Can you explain why farmers are getting 90% of their payments in the local currency, and 10% in US dollars?
KC: The mechanism is that dairy processors say they are selling milk in Zimbabwe dollars. That is where the problem lies.
If only the processors could say we can pay you 50% of what you deliver in the local currency (and 50%) in foreign currency) it would be better.
This would help farmers mitigate the cost of doing business.
MC:Â Have you engaged the government on this issue and what are the authorities saying?
KC: No, we haven’t engaged government yet. We are still handling the issue at industrial level.
We have been talking to dairy processors to see if they can increase the foreign currency payouts to 50% or somewhere thereabout. This will be better as it will make it easier for us to manage the farms compared to the current situation.
The daily processors never used to pay us in foreign currency before, but they then started paying us 10% of our deliveries in foreign currency.
We hope they can increase this to a level where farmers can sustain their operations.
MC: Side-marketing has also been an issue in the dairy sector. Take us through what has been happening in terms of this.
KC: Side-marketing has affected the sector in that milk is not being directed to dairy processors. Milk is being sold at farm level to people who come from major cities offering better prices. These people do not sell fresh milk.
They take it through the fermentation process first before selling it.
The buyers go to farms to purchase milk at US$0,50 per litre, compared to 48 cents per litre which is being paid by dairy processors.
So, farmers are better off getting US$0,50 for their milk. As a result, bona fide milk processors have been losing out. If you go around all major roads you will see milk being sold on roadsides.
It is going for US$0,50 up to US$1 per litre. That is how farmers are surviving. We now have a shift to the informal market, and the formal market is losing milk.
There have been milk shortages on the shelves while there is plenty in the informal market.
The farmer is going into the informal market to survive and be able to feed the cow. The money that farmers are getting in US dollars is actually giving them a better livelihood compared to what they are paid in the formal market.
But the important thing when we deal with perishable products like milk is hygiene. In countries like Kenya, the informal market is dominant, but the quality of milk becomes a problem.
We are worried that if we don’t address pricing issues the informal sector will grow.
Once it grows, hygiene becomes an issue. It becomes a health time bomb.
MC:Â So how much do you say the dairy sector has been losing to side-marketing?
KC: We are down by 600 000 litres on our targets. Last month farmers’ output was 550 000 litres down on targeted output.
Production is still going on at farms, but the milk going to processors is getting less. More milk is being sold on the roadsides where farmers are getting an average of US$ 0,70 per litre.
If you compare with the 48 cents per litre being paid by milk processors, you might actually have an idea of how much the sector is losing.
In March and April we had an increase in milk output. We are expecting an increase in production, but now we are getting into winter, which affects dairy cows’ milk output.
We are expecting a decrease in production until November when milk output traditionally picks up. Now cows have to go on zero grazing as there is nothing on the pastures. That is the trend.
MC: Have there been any positive developments in the dairy milk sector in the past year?
KC: Yes, we have had positive developments. We have seen people receiving in-calf heifers under this European Union programme.
They are going to increase the head count on farms. They will increase by the 153 that we have just received. This is in addition to the 147 that we received previously. In total the head count will increase by 300 this year alone.
However, the challenge is that some farmers who got these cows will not be able to feed them.
So the value chain needs to be interrogated from where the farmer is, what they are feeding the cow and who is buying the milk, who is selling the milk and at what price. Farmers also want to know what the markups are because for now, nobody has an answer.
So in short, I am saying the farmers have poor mechanisation. They will not be able to feed the cows. I think after this, what we need to do is to assist farmers who have irrigation to make feed on their farms.
This will go a long way in bringing down the import bill. It does not help bringing milk from South Africa. We are actually exporting jobs there. The import bill is currently sitting at about US$28 million per year.
Now, we are going to increase milk imports because we do not have enough milk in Zimbabwe. It means more US dollars are going out of the country. All processors are asking for an increase in the importation of milk products by threefold. If granted, this will see the import bill also going up threefold up to about US$60 million, which is huge in a country that has foreign currency challenges. I think we should develop our own milk and stop wasting foreign currency as we are doing now. We need to improve on mechanisation and we can start exporting milk as we used to do in the past.
