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Challenges persist for Latin America milk production
Thursday, 7 November 2024
According to the latest update from Quarterra, milk production in Latin America declined by 3.0% in the year to August compared to the same period last year.
Following a particularly challenging start to the year with low economic confidence and poor weather, spring has brought some improvement to milk production in South America. While September volumes were still down in many regions, the drop has been less severe. For example, Argentinian and Uruguayan milk production in September was down by just 1.9% and 5.3%, respectively. Production in Chile looks to have shown a more positive trend. Meanwhile, market indicators infer that milk volumes in Brazil and Colombia, have struggled.
Argentinian production has been running well below year ago levels, particularly in the first half of the year. Production was set back by severe weather and milk prices that were eroded by high inflation. The recent improvement at the beginning of peak season has been welcome, yet lack of rainfall continues to affect forage levels.
June was the last month of data available for production in Brazil. The year-to-date (YTD Jan-Jun) percentage change in production for Latin America was down by 1.4%. By August, this had decreased YoY to -3%, if we exclude Brazil. Following slight volume reductions in May and June for Brazil, and increased imports in July, upcoming production data will be a key watchpoint.
Operating costs in comparison to milk costs have been favourable across most of Latin America due to the recent strength in global markets. The increase in prices at the latest GDT event may make export opportunities more attractive, with potential to feed into stronger milk prices.
However, the weather continues to present ongoing challenges. La Niña is expected to bring dry conditions, already affecting Argentina, Brazil, and Uruguay. Greater use of inputs and concentrates may put pressure on margins.
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