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Rewa Dairy eyes more milk

Monday, September 17, 2007

Over the past few weeks concerns have been raised at the increase in food prices triggered by the rice in fuel costs and other causes which are beyond Fiji's control. One of those industries or products affected often is milk. It has been hit by the lack of milk production and the drought in milk supplying countries and to those countries who have a high demand for milk. Journalist ROBERT MATAU talks to Rewa Co-operative Dairy Company chief executive Ratu Savenaca Seniloli about the challenges they face and how they can tackle them.

FT: Do you foresee an increase in milk and dairy prices in the near future?

Ratu Savenaca: Our established suppliers from New Zealand and Australia have indicated prices stabilising around the last quarter but what we are experiencing is the non-availability of the milk powder products.

FT: Why would you justify such an increase?

Ratu Savenaca: As the world dairy market analysts are saying, the huge increase in the past eight months is unprecedented. Supply globally had struggled to meet the world demand and in Rewa's case where it wholly imports milk powder, the impact was immediate. Another reason was given in that BBC article shift from livestock grain to biofuel grain farming. The reduction of subsidies in Europe also had an impact where less dairy products became available in the world market.

FT: Have you been talking to the PIB about a proposed increase?

Ratu Savenaca: This is the normal process. Other entities also put in submission for a price change and ideally submission should go in every quarter. In some dairy lines, local market forces drove the price down when manufacturer and importer had margins to work with. Unfortunately this is very rare now as margins are razor thin. We all understand the macro-situation and have sacrificed margins

FT: Do you think skyrocketing world prices would push local milk prices up as raw milk product is imported from overseas?

Ratu Savenaca: Rewa Co-operative Dairy Company (RCDC) also imports pre-pack UHT milk to meet the local shortfall. If the prices change significantly then we will go through PIB.

This is the unfortunate position, if we were 50 per cent and self sufficient, the local supply can cushion the fluctuating world dairy prices. RCDC does not import raw milk but did explore this option earlier this year a very costly exercise. If Fiji's dairy industry was export focused we would have gained good return.

Unfortunately, Fiji is on the receiving end. Management is exploring other sources of dairy products apart from NZ and Australia.

This exercise needs a thorough due diligence to ensure safe status of animal disease from the new source and we are working with the Ministry of Agriculture on this front.

FT: What plans does Rewa Dairy have to increase milk production in Fiji for local use?

Ratu Savenaca: We do expect a shift to liquid milk due to the rise in milk powder price. Short term steps to increase locally collected milk is the setting up of rural milk collection centres to cater for the small dairy holders. One is close to completion at Burebasaga and there is another one earmarked at Naqali (Naitasiri). The projects are driven by the Ministry of Agriculture and Rewa Dairy will manage the centres. Big dairy holders are concerned about their lease and this is another factor why some are not investing back into the farm. We are highlighting this issue to the relevant bodies so that a confirmed position can be drawn out now instead of leaving it to the last few months.

Continuing the subsidising of input costs to the dairy farmers and hopefully attract a few more farmers.

FT: Have you done a head count on how many productive cows there are in Fiji?

Ratu Savenaca: Commercial dairy farms supplying to Rewa Dairy have around 6000 'wet' or milk producing cows. Another 30 per cent will be dry hence total dairy livestock is around 9000.

FT: What is local milk consumption like (figures)?

Ratu Savenaca: Total raw milk required by Rewa Dairy to convert to dairy products (butter, milk powder, cheese, cultured food and liquid milk) it trades domestically is around 74million litres. Of this, 12million litres goes to Ultra Heat Treatment (UHT) milk, Life. Last year, local milk supplied was 11.8million litres. Average growth in the past 4 years is 1 per cent. Daily raw milk supply to the 4 miles factory is 30000L/day.

FT: Why the slow growth with the concession over the years?

Ratu Savenaca: In the 90s, deregulation was introduced and other players who are wholly importers entered the scene. The Co-operative continued receiving the reduced concession on some dairy lines.

The perception in the public is that this fund is given to Rewa Dairy. The reality is that RCDC is exempted from this duty and then is duty bound to manage and cater for all dairy holders (mostly subsistence) introduced by government through the Ministry of Agriculture.

There are four rural collection centres being managed plus other assistance to dairy farmers to encourage them to enter and stay in dairy. Over the years more small holders entered the supply side.

Unfortunately the bulk suppliers were showing a decline big holders volume declined due to the land issue; no one in the family to continue the dairy farm business and constraints issues raised below also contributed to gradual decline.

FT: How many cows would you need to meet these figures?

Ratu Savenaca: At present average milk yield per cow per day, Fiji needs around 36,000 wet cows to be close to self sufficient level. If through proper dairy farm practices and we improve yield, we need lesser cows. We can improve towards the 74million figure by the following:

Improve the genetic pool of current dairy herd;

Align dairy farmer to basic dairy farm practice; and

Consistent supply of supplement feed.

FT: Does the Rewa Dairy factory need to upgrade?

Ratu Savenaca: The 4 miles factory can receive another 30,000L/day. Even the collection (mobile) infrastructure is under utilised with up to 60-70 per cent spare capacity during the second run of the day.

However this 1959 built factory requires improvements and this is an on going exercise, to conform to current standards like; OHS, Food Safety and environmental. The internal logistic is also being optimised.

FT: Can Fiji rear more cows to achieve this production?

Ratu Savenaca: What Fiji needs is a huge 'step up' in local yield and not a gradual growth. Rearing cows means two-three years down the line then we will see the improvement.

For the 'step up' to happen, the dairy industry needs the full support of the government. Work together to address the issues listed above. Look at the Asian countries; Malaysia,

Indonesia and China, in the last two-three years they have been importing huge consignment of dairy livestock to build up their self sufficient level on dairy, a basic food item. Malaysia and Indonesia shipped over 10,000 cows to their respective countries.

This is what we are exploring and these herd should come to dairy farms that are being managed satisfactorily.

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