Milk cess won't hurt consumers - Dairy Board
Published:Sunday | August 8, 2010 | 12:00 AM
The Jamaica Dairy Development Board (JDDB) says the one per cent levy recently imposed on the farm-gate price of milk will have minimal impact on consumer prices even as it generates an estimated J$64 million in its first year to finance projects to help resuscitate the island's struggling dairy industry.
"The one per cent is not expected to have any major inflation effect," said Dr Paul Jennings, the chief executive officer of the JDDB.
"The farm-gate price is only about one-third of the retail price."
Moreover, Jennings said, much of the milk produced domestically or imported into Jamaica "is raw material", an apparent suggestion that its pass-through impact on final costs should be limited.
Underthe scheme,which came into force on May 25, the cess is applied to both domestically producedand imported milk and milk equivalents.
But the tax is to be shared equally, at 0.5 per cent each, between milk producers and pro- cessors. The pro-cessors will deduct the levy and transfer it to the Dairy Board.
Critically, however, the levy will be calculated on the declared farm-gate price for milk, to be established at the start of each year by the Dairy Board.
That price is now set at J$45 per litre, which means that the JDDB can expect to earn 45 cents on each litre of milk or milk equivalent consumed in Jamaica — whether produced by local farmers or from imports.
From over 30 million litres a year a quarter a century ago, Jamaica's milk production has fallen to around 14 million litres annually, a decline triggered initially by America food-aid subsidy and subsequently by declining tariffs on imports as part of the country's market liberalisation.
On the other hand, in 2008, Jamaica imported 14,000 tonnes of milk/dairy products, which translates to an estimated 110 million tonnes of milk equivalent, or nearly eight times domestic production.
The value of this import was US$60 million.
According to Je- nnings, his org- anisation believes that Jamaican da- iry farmers, who mostly look to price levers to survive in the industry, have the ability to make inroads into the imports"in short order", given the right environmentwithin which to operate.
"We are trying to develop projects to enhance efficiency," he said. "The focus is capacity building in the sector."
Dr Paul Jennings, CEO of the Jamaica Dairy Development Board. - File