MILK consumed in all forms is a very important component of our diet. Historically, one would down a glass of milk at breakfast, another mini – milk pack at the school break-time through the schools milk program and of course milk based desert like ice-cream or pudding for one to treat themselves with after a hard day’s work.

Present day economic conditions have forced the majority of Zimbabweans to consider milk as a luxury instead of a necessity, and with that thrown away the unique nutrient package that milk offers, hopefully without serious health implications.

The dairy industry in Zimbabwe, like other industries has not been spared from the effects of the deteriorating economic situation in the past two decades.

The demand for milk however, still exceeds local supply and this has resulted in companies importing milk and milk products to supplement demand.

If at all, given the complexity of dairy farming and its dependence on the performance of other sectors like utility services, veterinary services and technological advances to mention a few in order to minimise its cost of production, this sector has been one of the worst hit and resuscitating it is not an easy game.

Whilst most businesses have operational efficiency challenges and choking debt levels, this industry has a worse challenge in that it lost the core of its survival, the dairy cows themselves.

The depletion of this resource has led to inadequate raw milk production resulting in operational inefficiencies mainly due to low capacity utilisation and closure of manufacturing plants by some companies.

The dairy herd fell sharply from the 1990’s with the lowest raw milk production year being 2009 at 39 million litres.
With the inception of the multi-currency regime, the size of the dairy herd as well as production have been increasing albeit at a slower pace than the pace it took to have the herd diminished.

Dairy farming is a delicate business which is capital intensive and has many factors that must be considered in order to increase yield.
Not only are the heifers themselves expensive to buy but their gestation period is also fairly longer at roughly nine months thereby increasing the time it takes to build up the numbers. In addition, ensuring that the livelihood of these beasts is catered for in order to increase the yield that the farmer desires from having dairy cows as an investment is also an important and costly component of dairy farming.

The main factors that affect the production of milk in dairy cattle are nutrition, comfort and genetics.
Cow comfort is measured in the form of adequately sized free-stalls/tie-stalls barns that make the cows rest time a pleasant moment, clean plentiful bedding that limits the breeding of harmful bacteria and ensures quality milk as well as ventilated space.

And like humans, what the animal consumes will affect its health, thus nutrition aspects account for the bulk of the costs that are incurred on a dairy farm.

With persistent droughts and the state of the local agriculture sector the costs of feed in the country is very expensive, the same applies to veterinary services and medicine costs.

With the country seriously lagging behind on breeding technology, the costs of getting the best breed can only compound the cost structure in the dairy industry.

Availability and costs of utilities such as water and power, disadvantages players in the local industry when compared to regional peers as they add to the costs of producing and preserving the liquid white gold, not to mention the high labour costs.

Further, with the structure of farms after the land reform program and emphasis on capacitating small holder producers, the benefits that accrue from having fewer larger dairy farms that were there prior to the land reform are being foregone.

Studies carried out by the Economic Research service in America on the cost and profitability structure of dairy farming revealed that there are huge economies of scale that accrue with large farms as the average costs of production fall as herd size increases and it is more profitable to consolidate dairy farms. Farms with 1 000 or more cows realised average costs that were 15 percent below those in the 500-999 size class and 24 percent below farms with 200-499 cows.

All these costs mentioned amongst others will then translate to a very uncompetitive raw milk cost per litre at around US$0,62 compared to US$0,40 and US$0,44 in South Africa and Zambia respectively.

Against this background, it is no surprise that Zimbabwe is the largest export destination at around 32 percent of the total milk and milk product exports from South Africa.

There has been a lot of talk recently of the local dairy industry calling for a tax to be levied on milk imports so as to create an even playing field.

Whilst some degree of protectionism is necessary for the fragile industry, to what extent will this go in addressing the real problem, milk supply, which entails rebuilding the nation’s dairy herd.

Although companies like DZHL, Nestle Zimbabwe and more recently Dendairy have started working on initiatives that aim to improve milk production through heifer programmes, this is just but a small step in solving the challenge at hand.

Dairy farming on a large scale is a profitable business which is vital to the nation’s health and has the capacity to create jobs and stimulate demand for other products needed in its industry.

Raw milk production for most countries in the Southern African region is decreasing against a projected increase in demand for milk and dairy products in developing countries of between 3,2 percent and 3,5 percent annually.

The local dairy industry target for this year was 70 million litres but with the prevailing liquidity crunch and lack of affordable financing options, this target is unlikely to be met as at the end of November 2013 production was at 49,6 million litres, slightly lower than the 50,8million litres produced comparative period last year.

Whilst notable progress has been made in milk production since dollarisation, and relevant support is now being rendered by the various stakeholders we are still a long way from the desired position.

The rebuilding of the dairy industry at this juncture will depend on the investment policies that are being implemented in the country to attract investors who will not only invest in the dairy industry but in other sectors key to the dairy industry.

This article was written by Zimnat Asset Management for FinX

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