Sao Paulo, 12/24 – Milk supply cut in the second half and domestic consumption reaction helped increase milk prices paid to producers this year. In addition, from January to November – the most recent rate – the national average price calculated by Scott Consultoria rose by 41%. Over the same period last year, Scott reported an increase of 20.2%. Considers an average of 18 milk producing states in the country.
“Production was sluggish, affected by the weather, and fierce competition between industries caused prices to rise,” Scott, described by market analyst Sonia Honeyman, in his “Carta Light”. “For this reason, imports of dairy products have also increased since July, reducing competition between industries.”
According to Scott, the lack of rain in the producing areas affected both grain production – increasing costs – and grazing lands. “Compared to 2019 and 2020, operating costs grew over several months, mainly driven by higher costs of concentrated foods such as corn, soybeans and cotton,” the researcher was quoted as saying. According to Scott’s survey, soybean food in Sao Paulo is averaging 22.5% more expensive from January to December compared to the same period from 2019. In contrast, corn kernels were praised by 38%.
However, even under pressure from costs, the producer still made a profit, due to the increase in the price of milk paid to the farmer, the consultant says.
For the months of November and December – with respect to milk collected in November and paid for in December – the trend towards price stability due to adjusted supply and weather and input prices is “milk in the field during the months in question, unlike the distribution behavior”.
In terms of profit margins, these are expected to be tight in the medium term, with milk prices expected to be paid to the producer in the next installments, which will be made during the harvest season, and inputs are still high. However, even under this perspective, there should be an increase in the country’s milk production, a fall in the exchange rate, a reduction in production costs and an increase in rainfall, mainly at the end of this year and in the first two months of 2021.
“As a result, the milk market is relatively low until February / March 2021,” Scott was quoted as saying. “However, the pressure is expected to be mild this season.” In addition, the average milk price is expected to be higher than what was recorded in 2020 next year. However, it warns of production costs, which may be lower compared to 2020, but still higher. Is higher than in previous years.
Despite many uncertainties over factors such as epidemic (second wave / vaccine), emergency relief results and the recovery of the world economy, it is hoped that the macroeconomic situation will recover next year. Supply and demand for dairy products. “There is also a forecast of strong growth in demand in Asia, which is generally good for Brazilian exports,” Scott concludes.