The price of raw milk could change direction. Both the foreign market and the domestic market tied to local consumption have stopped pulling. This results in a certain caution on the part of the demand, if it seeks to draw a vector forward for the remainder of the year. On the other hand, the fall in the purchasing power of consumers, the lack of competitiveness of the exchange rate and a decrease in international prices would seem to complete the projection picture. All this portends, in the opinion of analysts, that there will inevitably be a brake on the increases that dairy producers have been receiving.
For the dairy sector, things are no better. An element to take into account is the accumulated drop of 5% in the last two months in the international price of milk powder (according to the Global Dairy Trade or GDT, for its acronym in English).
To this is added a type of exchange which is slowly registering a delay, which results in less competitiveness for exports, something that compresses the sector’s possibilities of continuing to recognize increases to its suppliers.
It goes without saying that exports are settled with an 80-20 scheme, with most of it at the value of the official dollar and the remaining 20% in cash with settlement.
Alarm due to consumption levels
Regarding consumption levels, there are alarming data. The accumulated fall in dairy consumption from December 2023 to January 2024 was 16.5% vs. the same period of the previous year, according to the National Dairy Directorate. Added to this are the numbers from Scentia, which measured the supermarket and self-service channel (it should be noted that these have felt the decline less than the traditional channel, which collapsed considerably more), by taking the breakfast and snack categories of the supermarket channel. , the fall in February ’24 vs February ’23 is -9.6%. The analysts consulted highlight that this downward trend has deepened month after month and that they predict a March that could be even worse. A no less important fact is that between 75% and 80% of the country’s milk production is destined for domestic consumption.
In recent months, producers have suffered strong shocks to their productivity and profitability. The consequences of a prolonged droughttogether with an excessive increase in the costs of feeding their herds, a product of the selective devaluations of the government of Alberto Fernández (“soy dollar 1 and 2”), and prices delayed by government controls, resulted in an unprecedented drop in production of the summer – autumn 2023/24 season of 18% nationwide.
In the industry they point out that this scenario is beginning to reverse. On the one hand, The elimination of price controls and the strong devaluation of the peso pushed the change. On the other hand, a more benign climate for dairy farming.
In recent months, Milk producers have received increases in the price of raw milk according to SIGLEA of 94.4% accumulated between the months of December to February, largely repairing the economic damage suffered. At the same time, production costs have stabilized, and forage stocks are in the process of being recomposed, predicting a good winter-spring campaign, which is already showing positive signs. Specifically, taking the reference price of the value of raw milk from SIGLEA and the value of corn shown by the Rosario Stock Exchange for the month of February, the milk/corn ratio for February was located at 2 and if increases are validated, would reach levels well above historical highs.
Source: Ambito
