South American Real Estate News

The very large food Asian company Olam evaluates withdrawing from Uruguay Dairy Sector

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The Olam company from Singapore acquired the venture with a credit line of USD 100 million, going on to control 100% of the property of the company; however, the company suffered a loss of US$74 million, which exceeded the US$65 million of debt from the previous year.

The proposed business model was the incorporation of technology and dairy farms on a scale of high productivity and profitability, taking 300 hectares with a thousand cows as a unit.

Health Crisis

Olam failed to stop and eradicate the brucellosis and tuberculosis outbreaks that affected his herds; the Compensation Fund of the Ministry of Livestock as of December 2020, of the total of all the producers that it had to pay, 85% went to Olam. Thousands of animals were slaughtered and various methods were tried but failed for 12 years to eliminate the problem.

Numbers

Olam concentrated its activity in Florida, by closing the Rocha and Colonia units; It is a supplier of Conaprole and Fray Bentos foods that receive 50% of the raw milk from Olam.

Olam remits 300,000 litres per day, which makes an average of 100 million litres per year, representing 10% of all national milk production.

Of the 700,000 milking sheds in the country, 40,000 belong to the Asian company, that is, 6% of the herd.

For the company, the insufficient price of milk and the growth of costs added to the sanitary problems that it cannot overcome would be the reasons for its withdrawal from the dairy basin, generating an unfavourable impact on the sector.

The mega-dairy company Olam is considering withdrawing from the country; The Asian giant expresses that the insufficient price of milk and the growth of costs, added to the health problems that it cannot overcome, would be the reasons for its withdrawal from the dairy basin, generating an unfavourable impact on the sector.

Background

In 2006, the New Zealand Farming System was established by the directors and executives of PGG Wrightson to apply New Zealand technology to low-cost agricultural land in Uruguay, but in 2011 the drought in that year and the fall in prices affected their ability to finance the business with debt.

Fabían Hernández of the Florida Milk Producers Society commented to some media that although the company has not communicated its withdrawal, it would continue to produce in Florida for 90 more days and then it would close permanently, “generating a huge loss of jobs and reducing by a 7% the remission of milk to the entire system, which receives 30% of the milk production of the entire country from Florida.

(Data taken from Blasina y Associates)

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