Shorter cream supplies in South America [News South America n°3/2017]

Period: February 6 – March 3, 2017

Argentina

• Milk production: continues decreasing as many cows died due to the recent floods.
• Weather situation: has improved in the recently flooded dairy states of Córdoba and Santa Fe. However, the current high summer temperatures are boosting heat stress on milking cows.
• Overall market situation: with most educational institution reopening, milk requests from bottlers are increasing. There is less than adequate milk supply to cover some manufacturing needs. Because of this, some processors are limiting milk powder manufacturing and prioritizing the production of  cheese.

Uruguay

• Milk production: has plateaued thanks to steady weather conditions, after a drecrease mainly due to higher summer temperatures and muddy paddocks in several dairy operations.
• Overall market situation: milk intakes are mostly in balance with all processing needs. Fat and protein levels in milk remain low. Butter production rates are lower, driven by shorter cream supplies.

Brazil

• Milk production: is seasonally down in many dairy operations due to unsteady climate conditions and higher daytime temperatures. The shortage of milk is helping to sustain higher farm gate prices.
• Overall market situation: with an increasing consumption of milk fat and lower seasonal supply, the cream market is strengthening. Cream demands from butter churners and manufacturers of other cream based products are strong. In southern Brazil, summer warmth is stimulating rapid soybean and corn crops development.

MILK DELIVERIES

• Argentina: -14.38% (2016 year-over-year)
• Uruguay: -1.45% (Jan 2017 y-o-y)
• Brazil: -5.08% (Jan-Sep 2016 y-o-y)
• Chile: -0.29% (Jan 2017 y-o-y)

SMP prices for 1,25% butterfat: 2,575 – 2,775 USD/MT, F.O.B. port (about 2,432 – 2,621 €/MT).
Export prices increased. With a shortage of milk in the region, SMP production has been irregular, while inventories continue tightening. The current demand is above SMP supply. Export trades from Uruguay and Argentina to Brazil are active. A strong Brazilian real is encouraging import activity.

WMP prices for 26% butterfat: 2,850 – 3,450 USD/MT, F.O.B. port (about 2,692 – 3,259 €/MT).
Export prices increased first, then slightly decreased, following GlodalDairyTrade events’ results. The bottom price of the range is reflecting moderate WMP export from Argentina and Uruguay to Algeria and Russia. The strong Brazilian currency is supporting import. WMP production is trending down. Nevertheless, WMP inventories are more than sufficient to meet manufacturing needs within the Mercosur bloc.

The Argentinian government is looking to expand their dairy products export volume to Mexico.
The Uruguayan government continues promoting the domestic dairy industry with loans and some aids to dairy farmers.

CLAL.it – Dairy seasons in the Northern and Southern Hemispheres

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