Latin America update: Argentinian dairy shifting from resilience to efficiency and optimisation

Quarterra reported that year-to-date (Jan–Dec 2025) production volumes in Latin America reached a new high and saw an increase of 8.3%**, compared to the previous year. Strong margins drove the growth.

Globally, milk deliveries saw an increase of 5.1% in December, compared to the same period in the previous year. Latin America is playing a significant role in the global increase in milk production, in volume terms but also in fat and protein constituents.

Figure 1. Year-on-year percentage change in Latin America milk production

Source: Quarterra

*Mexico data to November only
** excludes Mexico

Figure 1 shows year-on-year percentage change in Latin America milk production index for 2025 year-to-date (Jan-Dec) and by individual country.

In terms of trade, Q4 dairy exports from the countries (Argentina, Brazil, Chile, Mexico, Peru, Uruguay) combined were ahead by 17% versus the same time period in 2024.

However, a production direction change is expected for 2026, as falling milk prices begin to make impact, following a period of financially incentivising conditions. This is likely to be exacerbated by the war in the Middle East.

Favourable weather accelerated production in 2025 but the El Niño set to develop in the second half of 2026 could have a negative impact on production. High beef prices and reasonable feed costs may provide some cushioning. Quarterra have taken these considerations into account when forecasting a contraction to occur in the second half of the year, though volumes are variable by region.

In terms of demand, weakened consumer spending is expected to continue this year and geopolitical instability is another watchpoint. The EU Mercosur trade agreement could support smoother trade flows, expected to benefit EU dairy products.

Argentina focus: From resilience to driving efficiency and optimisation (longer-term outlook)

An IFCN report showed that Argentina, the second largest dairy producing country in Latin America, is poised for significant transformation. Opportunities have been highlighted for creating value while productivity rises. Milk production in 2025 totalled 11.62 billion litres, the highest volume recorded in a decade.

Production and farm structure

Argentina shows particularly strong growth potential due to good conditions for milk production. The region is recognised as one of the ‘world’s largest dairy growth platforms’ that offers an abundance of land, water and year-round grazing. Grazing systems remain the most popular, though intensification is occurring in the form of new large-scale players and more input-intensive systems.

The IFCN is projecting annual growth rate of 1.4% to 2035 for Argentina. The number of dairy cows is expected to rise by 8.4% to reach around 1.6 million cows by 2035. Argentina already has large herds by global standards, with 20% of farmers producing 60% of the total milk volume, but further farm consolidation and efficiency is lifting productivity growth.

Processing landscape

In contrast, the processing landscape is less consolidated and highly fragmented. Therefore, processing is currently at limited scale, with room for growth. Parallels have been drawn to New Zealand’s fast growth following investment.

Demand

Domestic consumption absorbs 73% of total production, while exports account for 27%. This export share is growing, with the majority currently destined for Brazil and Algeria.

Exports mostly consist of powders and cheese. With whey processing currently limited, room for expansion has been highlighted here, as well as the potential to tap into more of the global marketplace.

Economic situation

Under Milei's recent policy reforms (including deregulation, fiscal adjustments and market liberalization), economic conditions have been improving.

If these improvements continue, new operating conditions could reshape global supply chains, in the form of milk sourcing, processing, investment and trade.

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