Home » “Milk powder will help keep dairy prices down” (experts)

“Milk powder will help keep dairy prices down” (experts)

by archyde

As announced by Medias24 in a previous articlethe Customs and Indirect Tax Administration (ADII) announced on 21 November that the General State Budget (BGE) would cover the import duty (DI) applicable to skimmed milk powder and butter, as well as the VAT applicable to this DI.

This measure, which has took effect on November 17will remain in effect until October 31 according to the ADII, i.e. for a little over a year.

“To win on the quantities of fresh milk”

Concretely, how will this measure translate into the market, knowing that the use of milk powder for UHT milk is regulated?

Joined by us, a source within the Interprofessional Federation of the dairy sector “Maroc Lait” confides to us that “this circular is part of a set of measures that we have requested from the State”.

These products, which are currently very expensive internationally, “are taxed in Morocco [poudre de lait écrémé et beurre, ndlr]which mechanically caused an increase prices at the national level. This measure is mainly aimed at reduce the cost of dairy products on the market”.

Indeed, skimmed milk powder, imported by Morocco from various foreign countries, is experiencing an unprecedented outbreak internationally.

For example, in Europe, the price of skimmed milk powder is just beginning to stabilize in November at around 2,500 euros per tonafter having come close to 5,000 euros per tonne around April.

As for the price of butter, it also stabilized this month at around 4,000 euros per tonne, after having exceeded 7,000 euros per tonne last October.

At these prices plus import duties applied by the Moroccan government to these products, as well as the VAT applicable to these duties, which amounts to 50% for skimmed milk powder and 2.5% for butter, “Except for preferential origins such as Europe, with which we have a free trade agreement, particularly for agricultural products,” a source in Customs told us.

All of these factors may explain the various price increases announced in recent months for certain dairy productsin particular by Nestle Morocco for example, such as powdered milk for children.

“So it’s a measure taken by the government to reduce prices for consumers“, adds our interlocutor at Maroc Lait, who recalls that “this milk powder is used in particular by the dairy industry in the production of dairy product derivatives, such as yogurt. It will allow us to save fresh milk, which will essentially be used to produce pasteurized milk, and therefore save on the quantities of fresh milk“, which are already down.

Replenish stocks, especially for the month of Ramadan

Another expert in the dairy sector contacted by Médias24 tells us, for his part, that “given the low supply of milk currently on national territory, factories could perhaps use this powder for the production of reconstituted milk”.

“It is certainly not comparable to fresh milk, but it is better than nothing, in particular in the current context”, he continues, while recalling that this is only possible in the event of derogation.

“So this is an urgent measure taken by the government to ensure the supply of milk to the market“, he adds. “It will thus make it possible to solve the problem of the low milk supply, and above all to replenish the stock, especially for the month of Ramadan fast approaching.”

Use of milk powder: what the law says

“In Morocco, the use of powdered milk for the production of reconstituted milk is only allowed in a crisis. Fresh pasteurized milk, as defined, must not contain milk powder“, recalls our expert.

“To ensure this, the government has introduced a tracer in the milk powder. It is a material that is added to imported milk powder, which makes it possible to detect if the fresh milk contains milk powder. .”

“The introduction of this tracer came after the recording, in 2018, of a significant increase in the quantities of milk powder imported into Morocco. We therefore began to suspect dairy factories of using this powder for the production of milk, while presenting it as fresh pasteurized milk.”

Indeed, in 2018, when the dairy product boycott campaign was in full swing, producers in the sector were suspected of using the milk powder to make reconstituted milk which they sold as fresh milk; a practice prohibited by law.

In response to this controversy, a decree (2-18-709), amending and supplementing the former decree (2-00-425) relating to the control of the production and marketing of milk and dairy products, was published by the government. This text first reformulated the definition of reconstituted milk, as “the product obtained by adding water to milk powder in the proportion necessary to restore the specified water/milk solids ratio”, specifying that “the manufacture of reconstituted sterilized and UHT sterilized milks, is authorized only under the conditions which will be fixed by decree of the Minister in charge of Agriculture“.

This text also mentioned the establishment of a tracer which allows the government to ensure that fresh milk does not contain milk powder. “Only powdered milk and dairy preparations, added with soluble starch at a dose of five grams per 1,000 grams of powder, can be used by establishments and companies manufacturing processed milk and dairy products”, indicates the decree. . This starch is used as a tracer, facilitating the control of the finished product.

The use of milk powder is therefore regulated, but its use must still end once the dairy sector emerges from its crisis.

What are the consequences for breeders?

According to our sources, “this measure will mainly serve processing plants, and therefore consumers”.

On the other hand, “breeders could be indirectly impactedinsofar as the management of DI and the VAT applicable to these DI will allow factories to reduce the pressure relating to the supply of the national milk marketbut also to increase their turnover, which could subsequently lead them to increase the price of milk at production”, currently estimated at around 5 DH per litre.

“If we do not reach 6 DH/l, breeders, under current conditions, will not be able to reconstitute their livestock or regain the level of activity of a few years ago”, concludes our expert.

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