GCC dairy companies face severe shortage of fresh milk this summer

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The shortage this year has been intensified by rising costs of imported animal feed, which has risen by nearly eighty per cent in a few months, prompting some farms to stop feeding costly fodder to milking cows.

At the same time, dairy companies cannot raise their prices and the UAE Ministry of EconomyUAE Ministry of Economy has rejected a call by seven major dairy firms for price increase of between seven and 33 per cent.

He said due to the shortage of fresh milk, some companies were using milk powder to produce milk, yogurt and other dairy products.

However, most dairy firms claim on their milk and yogurt packets that the content is made from "fresh milk."

The UAE Dairy Association did not respond to written queries from Emirates Business about the milk shortage and officials from two leading dairy companies declined to comment.

Skaba said while larger dairy firms in the UAE use a lot of fresh milk, some of the smaller companies were not because of the shortage and for economic reasons.

Onofre Ortiz, Marketing Manager of Premier Ingredients, a Spanish company producing and exporting dairy products ingredients to the companies in the GCC, said dairies used skimmed milk to produce yogurt because it gives the product a longer shelf life.

"Nobody in the industry is using 100 per cent fresh milk to make yogurt. Using skimmed milk reduces the transport cost of milk, while giving the same characteristics of fresh milk," he said.

As European milk powder becomes costly, some leading ice cream manufacturers and dairy companies are buying cheaper milk powder from China.

Zhining Hu, International Sales Manager for milk powder firm Beijing Milky Way Trade Corporation, said there was good demand from UAE companies for Chinese milk powder.

The price of $3,500 per tonne compared favourably to the European product which costs $4,000.

Dairy industry experts say the companies are under increasing pressure because of rising costs.

"Feed price went up by 60 to 70 per cent. Cost of packaging materials and transport cost have also gone up. The Ministry of Economy is not allowing them to increase milk price, so some companies are struggling," Werner said.

UAE produces 300,000 litres of milk every day
The UAE produces about 300,000 litres of milk per day, of which some is made with milk powder imported mainly from Europe, New Zealand, Europe, Australia, Russia and East European countries.

The price of milk powder has gone up from Dh1,600 per tonne to Dh4,000 per tonne in two years.

The animal feed industry observers said the country needed around 100,000 tonnes of animal feed per year. Price of dried soyabeans and corn, two primary ingredients in animal feed, have shot up in the international market due to shortage. Reports suggested that soyabean farmers in the US and Asia have switched over to corn, palm oil and other crops to supply the biofuel industry.

Poor harvests in Latin America and rising Chinese demand have added to the price pressure.

A source at the Fujairah Feeds Company said prices of all products had gone up substantially due to shortage of the raw material in the global market and increased transportation cost. According to sources in animal feed companies, the price of soyabean meal, an ingredient of cattle feed had gone up from Rs8,000 (Dh700) per tonne to Rs14,000 within a year.

Another animal feed trader said the price of a tonne of alfa alfa used in animal feed had gone up from Dh800 to Dh2200.

By VM Satish

© Emirates Business 24/7 2008