Cepea, December 1, 2020 – Milk prices dropped in November, interrupting the upward trend of quotes that had been observed since June. According to Cepea surveys, the net “Brazil average” of the milk produced in October and paid to diary farmers in November dropped to 2.0434 BRL/liter, 5.3% (11 cents/liter) down from the average in October.
It is worth to mention that milk prices are influenced by the spot market and the dairy market, with a trend delay of a month. Thus, the price for the milk produced in October and paid in November is influenced by the performance of both the spot and dairy markets in October.
Because of the production seasonality, from October, milk prices are expected to decrease, since rainfall increases pastures availability. However, this year, the resume of milk production has not been as intense because the weather has not been very favorable. Besides, higher production costs hamper the activity. Still, in the first and second fortnight of October, milk supply was higher in the spot market (traded between dairy plants) of Minas Gerais, and the monthly average dropped by 16.8% compared to that from September/2020, to 2.23 BRL/liter.
Thus, according to agents consulted by Cepea, price drops were primarily linked to the pressure from distributors on trades of dairy products between plants in October. Consumption was low in that month, due to the high price levels for dairy products in previous months. Consequently, in October, the average prices for dairy products decreased, such as UHT milk, mozzarella cheese and powdered milk. It is worth to mention that, despite the tight inventories of dairy products, the sharp price rises for several other foodstuffs in the past months is influencing consumption in Brazil, which also results in a higher competition between retailers to attract clients with low prices.