Favorable climate in South America [News South America n°6/2017]

Period: April 17 – May 12, 2017

Argentina

• Milk production: is increasing, but slowly.
• Weather situation: favorably dry and warmer climate helped to ease excessive moisture and improved pasture conditions in the main dairy basins.
• Overall market situation: the current milk/cream supply is not sufficient to cover all manufacturing needs with the exception of cheese and bottled milk. The country is facing a high level of inflation, which is affecting the domestic consumption of dairy products, especially butter and bottled milk.

Uruguay

• Milk production: is steady to slightly higher.
• Weather situation: the favorable climate is increasing the comfort of dairy herds.
• Overall market situation: milk intakes are adequate to meet most processing needs. The cream market is strengthening. In this way, the operational costs of many processors are increasing, making the final product more expensive to the customer. The high combined debt of about $500 million, including milk producers and manufacturers, remains a major concern for many industry participants. As a result, the government announced a 15% reduction in the cost of energy for all dairy operations from June to August 2017. However, this governmental measure could be not enough to completely fix the current industry financial crisis.

Brazil

• Milk production: slightly improved, as climate conditions have been favorable.
• Overall market situation: farm-gate milk prices remain high. The Brazilian currency continues strengthening, prompting dairy imports mainly from Uruguay and Argentina. The low availability of milk fat boosted the cream market and the imports of butter. Cheese production rates are lower, as processors try to reduce large 

  inventories to prevent a drop in prices.

MILK DELIVERIES

• Argentina: -12.62% (2016 year-over-year)
• Uruguay: +1.03% (Jan-Mar 2017 y-o-y, provisional)
• Brazil: -3.68% (2016 y-o-y)
• Chile: +2.97% (Jan-Mar 2017 y-o-y)

SMP prices for 1,25% butterfat: 2,700 – 3,100 USD/MT, F.O.B. port (about 2,471 – 2,838 €/MT).
Prices increased, and are well above international values. SMP processing is irregular as condensed skim milk intakes are limited throughout the region. Inventories are mostly tight. Consequently, prices are inching up. Brazil continues to be the principal destination of the Uruguay and Argentina SMP exports.

WMP prices for 26% butterfat: 3,200 – 3,625 USD/MT, F.O.B. port (about 2,926 – 3,318 €/MT).
The price range has slightly expanded. Many processors are curtailing WMP processing, especially in Uruguay and Argentina. In the Brazilian market, some WMP processors reported a slight improvement in domestic sales. However, this market is still under pressure due to lower prices of imported products from nearby countries.

CLAL.it – Chile milk deliveries: monthly changes y-o-y

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