Proposed raw-milk price cuts threaten farm income as rising input costs and new statutory requirements add to the challenges facing South Africa’s dairy industry.
South African dairy farmers are under pressure to increase production, rising input costs, and meet regulatory requirements, while some face further cuts to the prices they receive for their milk.
The Milk Producers’ Organisation (MPO) warned on 14 October that a proposed further reduction in raw-milk prices by Lactalis South Africa could bring the cumulative decrease in prices paid to affected farmers to 70 cents a litre in 2026.
MPO chief executive Fanie Ferreira told The Money Show that the potential impact on farm income was substantial.
“Just this afternoon I spoke to one of our members in the Tsitsikamma area who is one of our biggest farmers. And, with this price cut, if this continued for one year, he’d be in for a loss of R12 million,” Ferreira said.
The warning comes as a new statutory framework for the dairy industry takes effect, introducing levies, registration and record-keeping requirements for specified industry participants.
Although the proposed price cuts and regulatory changes are separate developments, both form part of the operating environment for businesses across the dairy value chain.
What the new rules mean
Published in the Government Gazette on 26 June 2026 under the Marketing of Agricultural Products Act, the regulations cover levies on milk and other dairy products, registration of specified participants in the secondary dairy industry, and requirements for records and returns. They took effect on 1 July 2026 and are scheduled to remain in force until December 2030.
For July to December 2026, the levy on milk and cream that is neither concentrated nor sweetened is two cents per kilogram, excluding VAT. Different rates apply to other dairy products.
The registration and reporting requirements apply to specified businesses, including certain milk processors, importers, and businesses that sell raw milk to retailers. The obligations do not apply identically to every dairy farmer.
Milk South Africa (Milk SA) also operates an enterprise-development programme for qualifying black dairy entrepreneurs which aims to address barriers to the growth of smallholder dairy businesses.
https://milksa.co.za/
The organisation lists assistance with milking equipment, herd health, fodder, pasture establishment, skills development and compliance with legal and regulatory requirements among its interventions.
To qualify, farmers must have access to a market, sufficient land, a feeding plan, potable water and reliable electricity. The criteria highlight the importance of infrastructure and market access for small-scale dairy businesses.
Farmers face pressure
At a Farmer’s Weekly panel discussion on the dairy industry at the Royal Show on 9 October, dairy farmer Tom Turner described an industry in which producers have improved efficiency but continue to struggle to earn adequate returns.
Turner said South Africa’s dairy-farmer population had declined from approximately 7,500 to 830 during his farming career.
“Most dairy farmers would be financially better off selling their operations and putting their money in the bank. That is the reality, and these [study] figures were recorded during a particularly good year for dairy farming,” he said.
Andrew Morphew, a dairy farmer and spokesperson for FMD Response SA, illustrated the pressure on production costs by comparing milk’s purchasing power against diesel.
“In 2016, a farmer needed to sell 1,49ℓ of milk to buy 1ℓ of diesel. In 2026, that same litre of diesel costs 3,6ℓ of milk. The purchasing power of raw milk has declined significantly relative to our input costs,” he said.
Turner also questioned how costs and returns were distributed across the dairy value chain.
“Farmers are residual price-takers: everyone else takes their share, and we receive what’s left,” he said.
Turner argued that the industry must invest in marketing, product innovation and export markets to strengthen demand.
