October 8, 2008


South African milk producers urged to hedge grain costs


A sharp rise in grain cost in South Africa could badly affect milk producers and farmers should safeguard themselves against cost increases, a milk association warned Tuesday, 7 October 2008.


Managing director of the Milk Producers' Organisation (MPO) Etienne Terre'Blanche said producers must manage their grain purchases carefully over the next six months.


Grain prices may possess considerable upward potential and milk producers must make sure that they are not caught unaware of price fluctuations.


MPO economist Koos Coetzee said October 2008 futures contracts for yellow corn were currently trading at R1, 890 per tonne, compared with an export parity of R1, 660 and import parity of R2, 771 per tonne.


Coetzee said several factors can cause prices to rise such as input costs.


Nevertheless, Coetzee said corn producers presently still have large supplies in farm and other silos.


Milk producers could (also) enter into agreements with corn producers who have not yet traded their grain.


Terre'Blanche said milk producers who were currently under pressure as a result of lower producer prices would find it difficult to survive should grain prices suddenly rise.


Thus it would be sensible for milk producers to safeguard themselves against possible price increases, he added.

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