By Observatory of the Argentine Dairy Chain – OCLA, Foundation for the Promotion and Development of Argentine Dairy – FunPEL
The pandemic / quarantine / vaccines effect generates different direct and indirect impacts on employment, inflation, and the development of economic activities in local economies.
In general, climatic conditions have improved for corn and soybeans crops as well as for the development of pastures and the preparation of reserves (hay and silage).
The costs of milk production were strongly affected by the increase in the cost of concentrated foods (corn and soybeans).
In the first two months, milk production increased by 5.1% compared to the previous year (+ 4.0% estimated for the first quarter), prices in local currency and in dollars have been improving (US $ 0.29 / liter for March).
Milk production in Brazil lost strength in the fourth quarter of 2020 and advanced only 0.6% compared to the last quarter of 2019. The outlook for the first half of 2021 continues to be slow supply, given that the margins of the Producers continue to suffer from price stability and rising food costs.
Price of milk for March 2021: US $ 0.344 / liter (R $ 1.9384 to 5.64 R $ / US $).
Regarding the demand for dairy products in Brazil, the end of emergency aid in December 2020 had a significant negative impact on consumption in the first quarter of 2021. An extension of emergency aid from April 2021 may bring some recovery in demand in the second quarter, but it will also depend on the pace of the economy.
In the first two months of 2021 there was an interannual increase in milk production of 0.5%, the price for the month of February was US $ 0.41 / liter, an interannual increase of the order of 20.6%.
From the national dairy context, a growing consumption stands out that should continue to invigorate the market and strengthen prices, a welcome condition as it faces a rise in raw materials used for the production of concentrated foods and other inputs required in the fields like fertilizers and building materials.
In the first two months of the year, production grew by 5.9% year-on-year and in the last 12 months, the growth was 5.5%.
The average price to the producer was US $ 0.32 / liter, which implies a monthly increase of 2.4% and a year-on-year fall of 0.9%.
The future prospects for dairy in the extreme south of the American continent, where the main milk-producing countries are located, are very favorable from the point of view of their comparative advantages (surface area, climate, water, etc.) but unfortunately they are not available in general competitive conditions that allow these dairies to deploy their full potential to be major players in the world dairy.
Sources: DNL-MAGyP and INDEC – Argentina, Cepea Esalq USP and Rabobank – Brazil, Fedeleche and ODEPA – Chile, INALE – Uruguay.