South Africa’s dairy industry faces a pivotal moment: massive consolidation meets cautious optimism. With producer numbers plummeting 60% in a decade, those remaining navigate rising costs and disease challenges. Yet, a 2% production growth forecast and new Chinese export opportunities offer hope. What’s next for SA’s resilient dairy farmers?
Summary
South Africa’s dairy industry is transforming significantly, marked by dramatic consolidation and emerging growth opportunities. The sector has seen a 60% decline in dairy farmers over the past decade, with only 882 producers remaining as of 2024. Despite challenges, including declining per-cow productivity, rising feed costs, and recent disease outbreaks, the industry forecasts a 2% increase in unprocessed liquid milk production for 2025. This growth is driven by expectations of increased demand, particularly from new trade opportunities with China, which is projected to boost exports by 10%. The industry’s resilience is further evidenced by South Africa becoming a net exporter of dairy products in 2023 for the first time since 2014. While smaller operations continue to face economic pressures, larger farms are adapting through economies of scale and strategic breed selection. As the fourth largest agricultural sector in South Africa, with a gross production value reaching approximately R25 billion (US$1.3 billion), the dairy industry remains a significant contributor to the country’s economy, poised for cautious growth amid ongoing structural changes.
Key Takeaways
- Massive industry consolidation: 60% decline in dairy farmers over the past decade, from 1,365 in 2018 to 882 in 2024.
- Forecast growth: A 2% increase in unprocessed liquid milk production is expected for 2025.
- Productivity challenges: Between 2018 and 2023, the national average milk production dropped from 21.0 to 16.1 liters per cow daily.
- Feed cost pressures: Yellow corn prices hit a record high of R5,647/MT in January 2025, up 55% year-on-year.
- Export opportunities: The new dairy protocol with China is expected to increase exports by 10% in 2025.
- Disease management: The recent foot and mouth disease outbreak contained no new cases since September 2024.
- Processing trends: There is a 4% increase forecast for milk powder, cream cheese, sweetened/flavored milk, and whey powder production in 2025.
- Trade position improvement: South Africa became a net dairy exporter in 2023 for the first time since 2014.
- Market dynamics: There is a 5% increase in demand for unprocessed milk forecast for 2025.
- Industry value: Dairy remains South Africa’s fourth largest agricultural sector, worth approximately R25 billion annually.
The most striking feature of the South African dairy landscape has been the dramatic consolidation reshaping the industry over the past decade. You wouldn’t be wrong if you’ve felt there are fewer dairy farmers at industry meetings these days – the number of dairy farmers has plummeted by a staggering 60% over the past ten years. According to the latest GAIN report from USDA’s Foreign Agricultural Service, the total number of milk producers fell from 1,365 in 2018 to just 882 in 2024 – a 42.7% decline in six years.
This consolidation hasn’t happened evenly across the country. If farming in the Eastern Cape, you’re likely part of operations with the largest average herd of 1,285 cows per producer. Meanwhile, the Western Cape and KwaZulu Natal average 581 and 931 cows, respectively. It’s a familiar story we’ve seen in many dairy regions worldwide – smaller operations lacking economies of scale have found it increasingly difficult to remain profitable, often leading to buyouts by larger producers with deeper pockets.
“Uncertainty and inconvenience will always be part of our lives, but it is also true that the extraordinary force of the human spirit carries us to achieve greatness,” noted Nico Fouché, Milk SA CEO, in his New Year message to the industry. “I am therefore grateful for every positive-minded person in the dairy industry who is not distracted by uncertainties but stays focused on his/her mission.”
Production Challenges and Feed Cost Pressures
If you’re milking cows in South Africa today, you’ve likely experienced a troubling trend in productivity. The national average milk production has fallen from 21.0 liters per cow per day in 2018 to just 16.1 liters in 2023—a 23% decrease in just five years. This decline has happened despite (or perhaps because of) industry consolidation, suggesting that heat stress, escalating production costs, and the exit of more efficient farmers have taken a significant toll.
Your daily experience varies greatly depending on your location and management system. If you’re running cross-bred Holstein-Jersey cows, you’re likely seeing 18-20 liters daily, while those operating Holstein dairies in Northern South Africa under total mixed ration feeding systems might be achieving impressive yields of 40-45 liters per day. Location matters tremendously—coastal areas offer advantages through mild temperatures and better rainfall, allowing for quality natural and cultivated pastures, while inland farmers face more intensive and costly production systems.
The biggest challenge keeping you up at night is the crushing impact of feed costs on your bottom line. In January 2025, yellow corn prices reached a historical high of R5,647/MT ($295/MT), representing a staggering 55% year-on-year increase. These elevated prices are expected to continue until the harvest season begins in May, putting immense pressure on your cash flow and profitability during the first half of 2025.
The recent El Niño drought in 2023-24 didn’t help, particularly affecting grazing in the Free State, Mpumalanga, and Limpopo provinces. However, there’s some good news – precipitation levels indicate recovery from drought conditions, with above-average rainfall from December 2024 through January 2025. This should improve pasture conditions heading into the latter half of 2025.
Disease Management and Recovery
The foot and mouth disease (FMD) outbreak in May 2024 presented a significant challenge for many farmers, particularly in the Eastern Cape, where dairy farms were hit hardest. With the Eastern Cape accounting for 29% of the national dairy herd, this outbreak seriously affected individual farmers and the broader industry.
The response included the vaccination of 34 confirmed positive farms, the preventative vaccination of 36 additional farms, and the culling of 430 cattle. If you were operating in these areas, you experienced firsthand the operational disruptions, quarantine restrictions, and market impacts accompanying such disease events.
The good news is that no new cases have been reported since September 19, 2024, suggesting the outbreak has been contained. This represents a significant achievement for the industry and animal health authorities, though the economic impact on affected producers continues to be felt.
Breed Selection and Genetic Strategies
Your decisions about herd composition and genetics are increasingly strategic. While Holsteins and Jerseys remain the predominant breeds in South Africa’s commercial dairy herd, which numbers approximately 1.27 million cattle, many of you are likely considering or already implementing crossbreeding to address market and environmental demands.
There’s a noticeable trend toward Jersey cows for their higher milk solids content—rich in butterfat and protein—though you may be frustrated that South African processors generally don’t pay deserved premiums for these valuable components. This disconnect between breed selection benefits and market compensation represents a challenging dilemma for many producers.
You may also be among the growing number of dairy farmers practicing “beef on dairy” strategies, particularly with Angus breeds. In the Western Cape, as much as 80% of breeding is done by mating Angus bulls to dairy cows, with just 20% through artificial insemination using sexed semen. However, if you’ve tried this approach, you might share the common complaint that feedlots and backgrounding operations aren’t paying adequate premiums for these beef/dairy crosses compared to straight dairy steers.
Market Opportunities and Processing Trends
Despite the substantial challenges, several market developments offer reasons for cautious optimism. The South African dairy industry remains significant as the country’s fourth largest agricultural sector, with a gross production value of approximately R25 billion (US$1.3 billion).
You may find an opportunity in the forecasted 5% increase in demand for unprocessed milk 2025, driven by improved retail sales resulting from recovering disposable income and economic recovery. The decreasing food inflation trend, reaching a 14-year high of 14.4% in 2023, should free up consumer disposable income, potentially enabling purchases of higher-value dairy products.
Let’s talk about processing trends that directly impact your milk market. FAS/Pretoria forecasts that dairy processing for milk powder, cream cheese, sweetened/flavored milk, and whey powder will increase by 4% in 2025. Between January and September 2024, the utilization of unprocessed milk for manufacturing powder milk increased by an impressive 48%, while whey powder processing increased by 16%. These processing shifts could create new opportunities for your milk supply.
The new dairy protocol South Africa signed with China represents an exceptionally bright spot. Exports to China are forecast to increase by 10% in 2025. If you’re positioned to meet export market specifications directly or through your processor relationships, this growing international demand could translate into better farm-gate prices.
Pricing Outlook and Trade Position
The forecast suggests unprocessed milk prices will stabilize with a modest 1% increase in 2025, following an estimated 2% increase in 2024 primarily driven by supply shortages from the FMD outbreak. While any price increase is welcome, this modest growth barely keeps pace with overall inflation and doesn’t significantly ease the cost pressures many of you face.
On the trade front, there’s encouraging news. For the first time since 2014, South Africa became a net exporter of dairy products in 2023. For the first six months of 2024, imports of dairy products were 29.5% less than in the same period in 2023. This improving trade position could strengthen domestic markets over time.
The concentration of processing power—with just ten processors representing 70% of the dairy processing sector—continues complicating many producers’ bargaining positions. Major players like Clover, Lactalis, Woodlands Dairy, and Danone dominate the processing landscape. In contrast, some large processors have vertically integrated by owning their dairy farms.
Looking Ahead: What This Means for Dairy Farmers
Looking ahead to 2025 and beyond, you’re operating in an industry that, due to improving economic factors, is likely to continue growing despite the past five years’ weather—and disease-related challenges.
Following the new trade protocol, if you’re positioned to supply milk to export markets, particularly China, you may benefit from the projected 10% increase in exports. Similarly, if your milk is used to produce powdered milk, cream cheese, or flavored milk products, the forecasted 4% increase in processing for these categories could create additional demand for your product.
However, the structural challenges facing many operations remain significant. The industry consolidation trend shows no signs of reversing, with smaller producers continuing to exit due to economic pressures. Your success will likely depend on achieving economies of scale, controlling costs, improving productivity, and finding specialized market niches that command premium prices.
For dairy farmers watching South Africa from abroad, these trends mirror similar consolidation patterns in many regional dairy regions. The South African experience underscores the importance of scale, cost control, and strategic market positioning in today’s challenging dairy environment.
As feed costs potentially moderate in the latter half of 2025 and new export opportunities emerge, those who have weathered the consolidation storm may find themselves positioned for more sustainable operations in the years ahead. For the 882 producers still milking cows in South Africa today, resilience and adaptability are the defining characteristics of success in an ever-evolving industry landscape.
Learn more
- Global Dairy Trade Auction Kicks Off 2025: Mixed Results and Price Shifts
- China’s Dairy Dilemma: Navigating Milk Output Declines and Shifting Import Trends
- Global Dairy Market: Price Recovery Slows as China Reduces Imports
Join the Revolution!
Join the Revolution!Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
