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Organization of milk agroindustrial system is the greatest challenge for the sector

The milk agroindustrial system has advanced at a slow pace in Brazil. The imbalance between supply and demand has become a problem for the sector, resulting in great volatility of prices in the domestic market. The economy recession has seriously affected the consumption over the last years.

 

However, it is important to mention that the Gross Production Value (GPV) of milk increased 8% from 2016 to 2017, reaching 29.4 billion BRL – 15.9% of the total livestock GPV. Brazil is the fifth biggest milk producer in the world, with a yield of only 4.5 litters/cow/day. As a result, it is clear that the country has a great potential to go further. What is missing, then? Brazil needs to improve the organization among the segments that form the milk agroindustrial system: inputs, producers, cooperatives, processing companies and consumers.

 

This would certainly guide actions of players to reach common goals and promote competitiveness, as the measure improves efficiency in transactions that players operate with suppliers, partners and clients. As for milk, the organization of the chain has increased significantly over the last five years, following the paths observed in other markets, namely beef cattle.

 

Aiming to reduce risks involved in trading and to increase transparency, the sector has used price indexes in trades among producers, cooperatives and processing companies. As a result, purchase/sale contracts have also expanded, encouraging mid and long-term relationships among agents. 

 

Therefore, Cepea Price Indexes have played an important role in the connection of milk segments. Currently, the total milk traded by companies researched by Cepea in states of Goiás, Bahia, Minas Gerais, São Paulo, Paraná, Santa Catarina and Rio Grande do Sul accounts for roughly 45% of the volume of IBGE Quarterly Milk Survey. This great representativeness of Cepea Index is a result of a great effort that depends on gathering information with more than 200 players per month. As a result, the monthly research of milk prices paid to producers gains more and more visibility, adherence and application, allowing decision-making and planning for players.

 

Following changes in the milk agroindustrial system, new demands have appeared in order to improve the milk price index to producers. The Brazilian Cooperative Organization (OCB) and Viva Lácteos (Brazilian Association of Dairy Products) have united to enable methodological changes together with Cepea. In this partnership, a new form to collect data will be implemented, differentiating data per producer. As a result, more strategic information can be provided for partners, such as price averages (regional and per state) for seven producing states. Moreover, the new Index format will allow anticipating results for partners in the 10th business day of the month. Changes in the methodology started to be structured in February and may be implemented this year. Now, the challenge is to increase the network of collaborators to reduce information asymmetry even more and release price averages for other important mesoregions.

 

Consequently, Cepea expects to generate more strategic data for the sector and contributes for the organization process of the milk agroindustrial system, which has gained strength year after year. In 2017, the sector indicated that it is going to another organization level. The bigger space in media, the increasing search for information by players, discussions about productive and commercial bottlenecks have created a favorable scenario for the segments to align regarding challenges.

 

Needs to invest and increase yield, to increase the quality of the raw material, to impose transparency mechanisms of trades, to increase the level of management of farms, cooperatives and processing companies, to encourage the consumption of dairy products in Brazil, to expand trades with the international market and create long-term public policies for the sector are currently clear. There are many aspects to work on, which highlights that the reduction of weaknesses of the sector requires coordination and combined efforts.

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