Is milk powder too expensive?

From Dakar in Senegal to Ouagadougou in Burkina Faso, passing by Bamako in Mali consumers are complaining about the sharp increase in the price of milk powder. And they are not alone. Groceries and dairy plants join in. The reason is that the price of 25kg bags of milk powder – if you can find them – has gone up from 40 000 CFA francs to 80 000 francs.

Sales people and consumers are very worried. “We stand at a very serious moment in time. The orders that we have placed in Europe have been rejected. Export credits have been cancelled. And even when an order is accepted, there is a surplus tax on delivery” … says a Malian trader. And then he tells us, his voice overcome by bitterness: “The situation might even deteriorate. Further increases of the price of milk powder have already been announced.”

In Mali the 25 kg bags selling for 40 000 CFA francs on the market are disappearing. If and when you can get hold of remaining stock, the price per bag has doubled: it now costs 80 000 francs.

In Senegal the situation is the same. Consumers and dairy plants which buy milk powder have even put pressure on the Trade Ministry,

So that it has now issued an embargo on all re-exports of milk powder to neighbouring countries.

“If nothing is done to help the milk trade profession the situation will deteriorate further, before during and after the Ramadan Lent” warns the manager of a supermarket in district I in Bamako.

The term he used “the milk trade profession” is interesting. What exactly should be understood by it?

In his mind it covers all those who buy and sell milk powder or who process it into yoghurt or dégué, and those who sell formula milk.

But there are others in the trade. I am thinking of the owners of small cattle herds. They have difficulties in selling the fresh milk on the market, precisely because of competition from the massive imports of cheaper milk powder. I am thinking of the mini-dairies which, in solidarity with the herdsmen, have opted for processing fresh local milk. They are now rejoicing.

Yesterday the woman who runs a mini-dairy, processing fresh milk in Koudougou, called on me in my office. She was radiant. She had just discovered that the last batch of 25 kg bags of milk powder were no longer to be found in Koudougou. She added: “From now on customers will stop telling us that our yoghurts are better but too expensive. We will no longer have problems with selling our products. The only thing we need now is more fresh milk from the farmers.

How has it come to this? According to Mollah Omar in the Canard Déchainé , (a publication based on social criticism and satire*), of May 16th this year, the crisis is global.

“At the origin of the price increase on the international market, there is the abolition, in accordance with the recommendations of the World Trade Organisation (WTO), of the subsidies that Western countries used to grant their producers.

In order to increase their profits European producers have now turned to other dairy products, such as yoghurt and cheese. As a result there is a shortage of milk powder on the international market at present.

Another cause must be added: global warming, which has brought about drought in most of the notoriously largest producer countries, i.e. New Zealand and Australia, where production has fallen by 50%. Argentina has become an importer of powder milk, after having been in the front line among the major producers. The consequence is that on the European stock exchange for commodities, the price of one ton of milk powder has shot up from 3 100 to 4 900 dollars, this only between the 1st and the 5th of May this year. The same trend is seen in Oceania, where there was an increase from 3 000 to 4 100 dollars during the same period.”

Whatever consumers and dairy businesses may say, this 100% price rise is not a total disaster. In this publication we have many a time pointed out that the asking price for a 25kg bag of milk powder is far from matching the production cost of such milk. A price based on real cost should come to around 70 000 francs rather than 40 000. The African Economic and Monetary Union and the Economic Community of West African States, ECOWAS, would do well in turning this crisis (of which the worst is probably yet to come) to their advantage and introduce an appropriate import duty, to ensure that the price does not fall below the 70 000 franc level. The ECOWAS could then fully implement its agricultural policy in the milk sector. As a result, within a few years, fresh local milk production could take over from imported milk powder (as is already the case in Kenya) and we would no longer run the risk of being at the mercy of the world market, in spite of the millions of cows in this country.

Koudougou, June 10, 2007
Maurice Oudet
Director, SEDELAN

Visit our web site www.abcburkina.net