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Dairy Farming News from South America

Dairy Farming News from South America

Recent rains in Uruguay have firmed up dairy production and we are seeing month over month increases in milk production from June 2013 to July 2013.  Milk prices are robust at close to $0.40 a liter with the US$ hovering around UP$ 21.  All indications are that Conaprole is promoting increased milk production to meet WMP export opportunities.  This is good for Uruguay’s dairymen and the industry after the fiasco with the small processing plant owned by Mexican investors that has caused an unnecessary labor controversy in the dairy sector.

Argentina on the other hand wants to destroy the dairy sector with its new government decree requiring export permits for all dairy products.  When will Argentina’s politicians learn?  Expect significant push back from the Argentine dairy producers and their national agribusiness associations.  Argentine milk prices are still way below the Mercosur regional prices at close to $0.30 per liter with the AP$ at $8.25 (Blue) because the official FX rate is a joke when it comes to calculating production costs.

Argentine producers are exiting the dairy business faster than train commuters in BA.  I wonder how much land values will fall in Argentina after this swift move.  Uruguay looks like a better investment value than Argentina especially for milk production.  And to top it off, Uruguay exports to China (of all places) are growing strongly.  Since the start of 2013, exports for WMP are over 1,100 tons and valued at US $5.3 million.  The key here will be tariff rates for Uruguay, which are at 10% compared to 7% for China’s main milk supplier New Zealand.  There was an interesting announcement from EMBRAPA in Brazil where the ag research group said that Brazil will become a major milk exporter by 2023 with production of 50 billion liters per year.

Brazil still imports milk from Argentina and Uruguay even with $0.45 per liter payments.  Maybe the Pope can help EMBRAPA out with its dairy export program (wishes/hopes/dreams).  You would think that Brazil would focus on their fiscal and macroeconomic programs and make their citizens’ cost of living more affordable so that maybe they won’t protest the incredible taxes they pay for everything (and get little in return) before announcing that they want to be a major dairy exporter?

Milk production in Central America continues to be tight and production costs are rising faster than dairymen’s income.  My farmer friends in Costa Rica are just making a salary when it comes to producing milk even with a $0.55 per liter payment.  Too bad since the region needs the milk and more expensive dairy products hurts consumption just when consumers incomes are being stretched as well.

It appears that the Dominican Republic is once again trying to encourage local milk production instead of importing costly WMP.  This will be interesting since the DR has a new government and farmers have been hard hit when it comes to milk production.  Milk payment in the DR is still below production costs and the need for improved dairy equipment and sanitary practices will never be realized without increased milk payments.

Reprinted from an article by Richard Pena from  Agri Business Lac

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