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The average price of raw milk collected by dairies registered its fourth monthly drop in August, down 6.8% from July to 2.25 reais per liter in the “Brazilian average,” according to a Cepea survey. This value in real terms is 29.4% lower than the same period last year. With this result, the price of milk has accumulated a real fall of 13.6% since the beginning of this year (values were deflated by the IPCA of August 23).
Despite the sharp decline, the trend of decreasing milk supplies to producers may still persist. Cepea’s research, which is still being carried out, shows that the decrease in average pure milk in Brazil in September could be between 5 and 10%.
Factors supporting the devaluation of milk for producers continue to be the increased availability of dairy products domestically, which in turn is explained by the growth of national production and imports, which are still at a high level.
The Cepea milk capture index (ICAP-L) increased by 3.2% from July to August due to improved production costs in 2023 compared to 2022.
Funding is expected to continue to rise in September, still under the influence of investments made in the second quarter – which could continue to put pressure on prices.
However, it is important to emphasize that this context has changed. Since July, the fall in the price of milk has exceeded the devaluation of corn, so the purchasing power of livestock farmers has decreased in relation to this important product.
Cepea research shows that effective operating costs (COE) of dairy farming in the “Brazilian average” registered a second consecutive increase in September. This scenario raises concerns for the sector, p
given that the progressive loss of producer margins may reduce investment in activities in the short term.
With greater availability on the domestic market, dairy imports fell by 22% in September.
Dairy imports in September/23 totaled 154 million liters of milk equivalent, 21.8% lower than in August/23 and 24.3% lower than September last year, according to Secex data. This decrease in imports is due to increased availability in the domestic market and a general drop in prices throughout the Brazilian production chain.
Despite this, the decline may continue in September due to high availability in the domestic market. Despite the drop in imports in September by 21.8%, foreign purchases since the beginning of the year amounted to 1.6 billion liters of conventional milk, which is 90.4% more than in the same period of the year.
the past
Amid increased dairy supply and highly price-sensitive domestic consumption, dairy inventories across industries and channels rose in September.
As a result, prices for UHT, mozzarella and fractionated milk powder, agreed between dairy products and distribution channels in the state of São Paulo, fell by 6.3%, 2.3% and 4.2%
compared to August.
This drop in the derivatives market in September should be passed on to the producer in the price of milk harvested this month.
Milk production costs are increasing for the second month in a row
Effective dairy operating expenses (COE) rose 0.56% in September, taking into account the “Brazilian average” (made up of the dairy basins BA, GO, MG, SC, SP, PR and RS). This was the second consecutive monthly increase in the COE, which was mainly due to higher prices of production inputs such as fertilizers, corrective agents and diesel fuel during the month.
The Fertilizers and Adjusters Group posted a 6.94% increase in the “Brazilian average” for the second month in a row compared to August. Prices increased in all states controlled by Cepea, with an emphasis on MG and GO. The increase in the price of this group of means of production continued to be driven by the increase in domestic demand – in connection with the beginning of sowing of the new crop of cereals – and the appreciation of the dollar against the real, which increased the prices of raw materials.
Exchange rate – Milk producers needed 23.7 liters of milk to buy a 60-kilogram bag of corn in August, which is 4.1% more than in July. The deterioration of exchange rates is due to the fact that during this period the devaluation of milk exceeded the comparison with corn. Despite a loss of producer purchasing power compared to input, this exchange ratio between April and August remained below the average of the last 12 months at 28.1 liters per bag.
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