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Why is the change of calculating milk prices necessary?

Aiming to reduce risks involved in trades, increase transparency and encourage mid and long-term relations, milk producers, processing companies and cooperatives have used, especially over the last five years, price references in milk trades.

 

Cepea have collected prices of milk paid to producers for 24 years. Currently, the total traded by companies in Goiás, Bahia, Minas Gerais, São Paulo, Paraná, Santa Catarina and Rio Grande do Sul states accounts for 76.3% of the volume for the same states involved in IBGE’s Quarterly Survey of Milk (considers the first semester of 2018 and evaluates the amount of volumes sampled in the Cepea research in the period compared to the amount registered by QSM in GO, BA, MG, SP, PR, SC and RS). Because of that, the research performed by Cepea has gained visibility and helped the decision making for agents.

 

Due to transformations in the agroindustrial system of milk and new demands to improve the accuracy of the survey, Cepea will adopt a new methodology for the calculation of milk prices paid to producers from January 2019 onwards.

 

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 producers (not including freight or taxes) and the volume produced, as well as the city where producers 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 producer lives, resulting in more accurate mesoregional prices.

 

In addition, it will be possible to aggregate data according to the daily production of each producer. It is known that the milk quality may be different among them, resulting in different net values.

 

In the methodology that will be used until December 31, 2018, minimum, maximum and average prices are calculated. In the new methodology, from January 1, 2019 onwards, Cepea will calculate the average price of the smaller production level (defined as the weighted average of prices by volumes traded with agents who have production lower or equal to 200 liters of milk per day) and an average value of the higher production volume (defined as the weighted average of prices by volumes traded with agents who have production higher than 2 thousand liters of milk per day). Moreover, the weighted average price considering all the volumes will be released.

 

Figures of state price averages will also change, having mesoregional prices weighted by the participation of the respective volume compared to the total produced in the state. In order to perform that, information will be collected by Cepea, not from IBGE. The same is considered for the average in Brazil, which will be based on a sample from Cepea.

 

TESTS – With financial support and partnership of agents from OCB (Brazilian Cooperative Organization) and Viva Lácteos (Brazilian Dairy Association), Cepea has been applying, since February/2018, this new methodology together with the current one, as a form of test, and results are satisfactory. Players and researchers from Cepea say that the new methodology may improve both quality and data accuracy.

 

Now, the challenge is to increase the network of collaborators to reduce even more information asymmetry and provide price averages to other important milk producing mesoregions.

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