Cepea, May 3, 2018 – Milk production has decreased for the third consecutive month, pushing up quotes, which, in turn, have increased for the third consecutive month in April. The net “Brazil average” (MG, RS, SP, PR, GO, BA and SC, without freight and taxes) closed at 1.1574 BRL per liter last month, 7.72% up (or 8 cents per liter) compared to that in March, according to data from Cepea. This is the highest average in the last eight months, in real terms (values were deflated by the IPCA from March/18), but, still, 10.3% lower than that in April/17 and similar to that in April/16. This year, milk prices paid to growers have increased almost 15% on the “Brazil average”.
In April, quotes rose in all states surveyed by Cepea, mainly in Rio Grande do Sul (+10.1%), Goiás (+9.7%), Paraná (+9%) and Minas Gerais (+7.6%). The significant price recovery was linked to higher competition among processors, due to lower milk supply in the field.
The Milk Production Index (ICAP-L) decreased for the third consecutive month in March, when it was 7.2% lower than in February on the “Brazil average”. In Rio Grande do Sul, Paraná and Goiás, the ICAP-L decreased more intensely: 9%, 8.4% and 8.3%, respectively, followed by Bahia (-7%), Santa Catarina (-6.9%), São Paulo (-6%) and Minas Gerais (-5.9%). Between January and April, the ICAP-L decreased 10.1%.
Opposite to 2017, the first quarter of 2018 was marked by lower milk supply. The lower prices paid to growers last year discouraged the activity and reduced investments. Thus, many farmers left the activity and the slaughter of cows increased.
The higher quotes paid to growers were also linked to dairy products price rises in the last months. According to Cepea surveys, the price average in April (until April 27) for the UHT milk traded between processors and the wholesale market of São Paulo State was 4.4% higher than in March, reaching 2.40 BRL per liter. According to agents from the market, demand has been increasing. However, the upward trend of quotes has been weakening in the UHT market since the second fortnight of April.
If, on the one hand, supply in the field tends to decrease even more in the coming months, on the other hand, consumers are showing difficulty to absorb by-products price rises. Most agents consulted by Cepea believe prices paid to growers will rise in the coming months, also due to higher production costs (since grains quotes are higher).