Low supply limits price drops in November

Cepea, December 5, 2019 – The milk price paid to Brazilian dairy farmers in November (regarding the volume produced in October) was 1.3493 BRL/liter on the net “Brazil average”, a slight 1.04% down compared to that paid in the previous month. The downward trend of quotes is linked to an increase in production, due to the seasonal period of higher fodder availability in the spring. However, the delay of rains in southeastern and central-western Brazil – which limited production – and the competition between dairy plants for milk in that period prevented quotes from dropping sharply, as observed in previous years.

 

The Milk Production Index (ICAP-L) increased a slight 0.55% on the “Brazil average” between September to October, less than the expected for the period. Besides the delay of rains in southeastern and central-western Brazil, the agents consulted by Cepea highlighted that, as many farmers have left the activity, many others are concerned about making new investments and grains prices have been at high levels, the potential supply growth decreased in that period.

 

With the low milk supply in the last quarter, price behavior has been atypical this year. The sharp decrease that is usually observed at the end of the year may not occur. According to agents from the sector, milk production in November – for payment in December – may have been stable. Moreover, the attractive price levels in the beef cattle market are encouraging female slaughter and, in the coming months, may direct part of the milk produced for feeding calves.

 

(Cepea-Brazil)

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