Paul Scott (centre), chairman of the Seprod Group, looks on as Opposition Leader Andrew Holness (left) and Natalie Neita-Headley, minister without portfolio, have a drink of Serge Island Milk at the announcement of Serge Island's brand ambassador for track and field at the National Stadium in February. - File


Paul Scott (centre), chairman of the Seprod Group, looks on as Opposition Leader Andrew Holness (left) and Natalie Neita-Headley, minister without portfolio, have a drink of Serge Island Milk at the announcement of Serge Island’s brand ambassador for track and field at the National Stadium in February. – File

The cost of powdered milk has surpassed the price of fresh milk produced locally by 23 per cent amid a global increase in prices because of increasing demand for the commodity, creating the need for more local fresh milk consumption, industry experts say.

“The price of milk powder has been increasing on the world market and has been for some time,” chief executive officer of the Dairy Development Board, Hugh Graham told Sunday Business.

Locally, “What has happened is that at this point in time, at the price at which milk powder comes into Jamaica, when you do a fluid milk equivalent it’s turning out to be more expensive than the fresh milk,” Graham said.

Farm gate prices for fresh milk range between $62 and $70 per litre, compared with $76 per litre for reconstituted milk powder, the Dairy Development Board head said, noting the clear competitive advantage of fresh milk over powdered milk.

Whole milk powder prices stood at roughly US$2,000 per tonne in 2009. Between 2010 and 2012, the price ranged between US$3,000 and US$4,000 per tonne, Simon Roberts, general manager of Dairy Industries Jamaica Limited told Sunday Business.

“About a year ago the price rose from US$3,000 to US$5,000 per tonne,” Roberts added.

Stakeholders suggested that the increase in prices has resulted from increasing demand especially from the emerging middle classes of China and India.

Jamaica imports “90 per cent of milk and milk products” for consumption, Graham said.

Data from the Statistical Institute of Jamaica for the calendar year to October 2013, show that 2,092 tonnes of skimmed milk were imported at a cost of US$8 million, with the United States and New Zealand being the two largest source markets.

Imports of whole milk powder for the same period stood at 101 tonnes at a cost of US$388,000, the bulk of which came from Ireland and New Zealand.

For Graham, the increasing price of powdered milk presents improved opportunities for the consumption of local fresh milk to reduce the country’s reliance on imports.

“It means two things for us locally. The upward movement in the price of milk powder is a drain on our foreign exchange since 90 per cent of our milk for consumption is imported in various forms. Also, the increasing prices mean the cost of milk powder is being pushed out of the reach of consumers and that poses a risk for food security,” said Graham.

For Seprod’s chief executive officer, Byron Thompson, the company is hoping to get to the stage where it replaces milk powder in its baked products and instead “produces enough fresh milk to make our milk baked products”.

Some 116 million litres of milk will be needed to satisfy local consumption annually, and local production accounts for just over 10 per cent, Graham said.

Imported milk solids satisfy the remaining portion, the industry head said, suggesting that “we need to look closely at that.”

In the 1990s, local output was up to 38 million litres. For 2012, Jamaica produced 12.85 million litres of milk and 12.5 million litres in 2011.

Production for 2013 was 12.34 million litres, Graham said, noting that the previously stated target of 13.1 million litres was not met. The Dairy Board head is hoping to improve output under the Dairy Sector Revitalisation Programme which was launched in 2008.

The programme aims to raise the productivity levels on dairy farms in order to increase the local production of milk to 55 million litres by 2017.

For Graham, the increased prices of powdered milk present an opportunity for local farmers.

“There is still some capacity here to produce. All our local processors are operating way below capacity,” he said.

“Our imports average over US$50 million a year for milk and milk products. We import roughly seven million litres of yogurt annually, about one million litres of ice cream and close to one million litres of whipped cream,” said Graham, asking, “why can’t we make those here?”

 

Link to article: http://jamaica-gleaner.com/gleaner/20140330/business/business1.html