With limited supply, prices rise in Brazil

Cepea, February 5 2019 – The prices paid to Brazilian dairy farmers started to rise in January. According to Cepea researchers, the net “Brazil price average” in January (regarding the milk produced in December) was 1.2836 BRL (0.3435 USD) per liter, 4% (or 5 cents) higher than that from December. The sharpest price rise was observed in southern Brazil – in the Southeastern region, quotes remained stable. The price rises observed in the field were linked to the low milk supply and the increase in the competition among dairy plants for raw-material.

 

Although the prices paid to dairy farmers rose in 2018, the production costs increased in the last quarter of the year, when farmers’ revenue dropped, limiting new investments in the activity. Besides, excessive rains in the South and the lack of rains in central-western BR also affected the activity.

 

For February, prices are expected to rise even more, since, in January, the competition among dairy plants for suppliers pushed up the price levels for trades. Quotes also increased in the milk spot market and in the UHT milk market, which indicate the price behavior in the field. In January, processors’ higher demand for milk in the spot market pushed up prices by 37.6% on the average of Minas Gerais State. UHT milk quotes, in turn, rose 6.5% between January 2 and 29 in São Paulo State.

 

METHODOLOGY – Starting January 2019, Cepea adopted a new methodology to calculate the milk prices paid to dairy farmers. The main change in the methodology is the form of collecting data: it will be disaggregated. It means that, every month, Cepea collaborators will send, by e-mail, the net price paid to dairy farmers (not including freight or taxes) and the volume produced, as well as the city where farmers are located (using an IBGE code for the city). Moreover, collaborators will send the average freight value. This new form of collecting data allows Cepea to calculate price averages within a standard. As a result, it will be possible to group data according to the city where the farmer lives, resulting in more accurate mesoregional prices. Besides that, there are new names for the minimum and maximum prices, and new calculation for states averages and the “Brazil average”, which started to be calculated according to the sample volume.

 

(Cepea-Brazil)

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