Increased SMP production to get more cream [News South America n°5/2017]

Period: April 3 – 14, 2017

Argentina

• Milk production: is enough for most processing needs.
• Weather situation: in the provinces of Buenos Aires and Córdoba, heavy rains flooded some dairy farms, hampering milk yields and causing some issues with transportation. Meanwhile, in other important dairy basins like Entre Rios, dry weather prompted cows’ productivity.
• Overall market situation: cream supplies remain very short on a bullish market. In order to raise cream intakes, several processors are increasing SMP production. Milk fat premiums remain high, elevating manufacturing costs of many cheese processors. At this point, the domestic demand for cheese is light.

Uruguay

• Milk production: is steady, in line with seasonal trends.
• Overall market situation: bottled and UHT milk requests from educational institutions are down because of the fall holidays. Nevertheless, fluid milk demands from several supermarkets and restaurants are fair to good. Strong competition for cream among some processors, including butter churners, as supplies are very tight.

Brazil

• Milk production: is down, which is typical at this time of the year.
• Weather situation: seasonal rain showers maintained favorable conditions for second-crop corn and cotton in key dairy zones of central and north-eastern Brazil.
• Overall market situation: the short milk supply is boosting farm gate milk prices. The expensive raw milk is raising cheese values. As a result, sales of cheese are slow while stocks are building.

MILK DELIVERIES

• Argentina: -12.62% (2016 year-over-year)
• Uruguay: -1.81% (Jan-Feb 2017 y-o-y)
• Brazil: -3.68% (2016 y-o-y)
• Chile: +0.71% (Jan-Feb 2017 y-o-y)

SMP prices for 1,25% butterfat: 2,450 – 2,850 USD/MT, F.O.B. port (about 2,312 – 2,690 €/MT).
Prices decreased slightly: many processors are increasing SMP production in order to get more cream.  Nevertheless, prices remain above other international levels. SMP exports from Uruguay and Argentina to Brazil are more active in this time period.

WMP prices for 26% butterfat: 3,250 – 3,600 USD/MT, F.O.B. port (about 3,067 – 3,398 €/MT).
Prices moved up, well above the international prices in Oceania and Europe. In many plants more SMP has been produced instead of WMP. Thus, WMP inventories are tight, while the demand from food processors remains strong in Brazil.

Cream supplies remain very short in South America. As a result, many processors are increasing SMP production in order to get more cream.

CLAL.it – Argentina: main purchasing countries of SMP

Source: USDA summarized by the CLAL Team
Note: assessments about market trend are expressed in US$
More informations about dairy market in Argentina, Brazil and Chile are available on CLAL.it