For a dairy farm, a low milk price is not just a market headline. It is a test of whether the business can keep operating when income tightens and costs remain high. In October 2015, MPO chief executive Dr Chris van Dijk described farmers facing lower farm-gate prices, higher input costs and difficult seasonal conditions in important dairying regions. South Africa’s milk price was relatively stable compared with prices elsewhere, he said, but that did not mean farms were always prepared when the farm-gate price fell. In some areas, the lower price was close to, or even below, the cost of producing milk. The downturn might be short-lived, but price volatility would remain a central management challenge.
Start with the numbers, not the hope
Van Dijk’s first principle was blunt: hope is not a strategy. A farm needs to remain cost-competitive and maintain positive cash flow, rather than assume that effort in the milking parlour will automatically be rewarded. Every day, he urged farmers to look for ways to optimise profit. That means connecting sound dairy science with sound business practice and making decisions against a strategic plan, not simply reacting to the latest price.
The plan should cover the short, medium and long term. A low-price period makes cost control especially urgent, but a farm should not treat that as its only task. The underlying enterprise needs to be able to respond when conditions change. Van Dijk’s point was that farms should work for their owners—not the other way around—and that improving the business requires attention to the whole operation.
Put feed management under the microscope
Feed is an obvious place to begin because it represents an estimated 60 to 70% of farm income, according to Van Dijk. His practical first move when milk prices are low was to sit down with the farm’s nutritionist and rework the ration. The aim is not simply to cut feed indiscriminately, but to review the feeding plan and its costs in light of the farm’s production needs.
Grain prices can also be volatile, so purchasing requires proper planning. The advice is to avoid treating grain buying as an afterthought: consider it as part of the farm’s effort to establish a low production-cost base that can offer protection against price shocks. Feed management and purchasing decisions are therefore linked—both need to be revisited as part of a deliberate profitability plan.
Make adaptability a whole-farm discipline
Cost control matters, but the MPO’s proposed support programmes were broader than a ration review. Van Dijk said the organisation was working with specialists on programmes to help members adapt and remain profitable every year, not only when milk prices were high. The areas for review included financial management; production and reproduction; the welfare and health of individual animals and the herd; environmental management; and the personal health and well-being of the people working on dairy farms.
That range of priorities is a reminder that resilience is not achieved through one saving or one technical adjustment. Financial oversight must sit alongside production decisions, animal care, environmental management and the capacity of people to keep doing demanding work. The practical task for each farm is to identify where its own enterprise needs attention and optimise those parts together.
Read the market, but prepare the business
The wider market figures reported in 2015 illustrate why farmers should not base their plans on a simple assumption that local supply or export opportunities will solve every problem. In the seven months to the end of July, South African milk production was 152 million litres higher than in the same period of 2014, a 10% increase. Yet in the first half of 2015, net imports were 89 million litres above the previous year’s level, while exports fell by 1% by mass and 3% on a milk-equivalent basis. The higher imports and weaker export performance left 90 million litres more dairy products available locally.
These figures came amid a cost-price squeeze: producers faced lower prices and higher input costs, while international and local producer prices were described as unsustainable over the long term and expected to recover. That expectation may offer a measure of perspective, but it is not a substitute for preparation. A recovery is outside an individual farm’s control; production costs, purchasing choices, cash-flow management and the quality of the farm’s planning are areas that managers can examine.
Build a farm ready to respond
The central message is to prepare the herd and the enterprise for changing conditions rather than wait for a better price. Review the ration with a nutritionist, plan grain purchases, protect cash flow and keep a strategic business plan that combines dairy and business principles. Then extend the review beyond feed and finance to production, reproduction, animal health and welfare, the environment and the well-being of farm workers.
Van Dijk’s closing confidence—that good times would follow and milk prices would recover—came with a condition: farms needed to ensure their herds and cows were ready to respond. For farmers under pressure, that makes resilience an active job. The price cycle may turn, but the strength to meet it is built through daily decisions made before that happens.
Key points
- Treat cash flow and cost competitiveness as priorities during low-price periods.
- Review the ration with a nutritionist and plan grain purchasing carefully.
- Use a short-, medium- and long-term business plan, not hope, to guide decisions.
- Review the whole enterprise, including finance, production, animal health, the environment and people.