Specialist on the sector, Valter Galan, correlates emergency aids and the high soybean and corn prices with their impact on the production chain.
In an interview with the specialist Valter Galan, in which the market analyst shares an outlook about the national milk market. Answering key questions to AgriBrasilis, the market analyst and associate at MilkPoint Market explains what is expected for the dairy milk for the next months and how the high prices in grains tends to affect its production.
AgriBrasilis – What to expect for the milk market in 2021?
Valter Galan – Side by side with the demand, the increase in the product’s prices and the cutback of emergency aids, it is expected a decrease in the volume of consumed products – a new emergency aid or the resume of the economy by mass vaccination of the population can alter this setting. On the other hand, the raise in international prices and the devaluation of the Real tend to open a window of opportunity for dairy exports from our country.
On the other side of the offer, serious climatic issues (lack of rain) have reached some of the main milk belts of the country, especially in the south. At the same time, high prices of corn and soybean have negatively affected milk production. Simultaneously, the dairy volumes of imports are still high and come in our market at a moment where the demand is weakened – so there is a higher price pressure.
AgriBrasilis – How did the historical high in grain prices affect milk producers?
Valter Galan – The grains (corn concentrate and soybean bran) represent from 30 to 40% of milk production costs in Brazil and, exactly because of that, have strongly impacted milk producers.
AgriBrasilis – What is the dynamics of the Brazilian dairy chain?
Valter Galan – Briefly, our market is still focused on big commodities, such as UHT milk, cheeses (especially mozzarella) and powdered milk, with an even bigger number industries with narrow margins in these commodities and an even bigger number of milk producers, with both production system and scales extremely heterogeneous. Our production basically covers the national market/consumption and we still import some amount from Mercosur to complement our demand.
AgriBrasilis – Which are the main indications of the milk market that producers should pay attention to?
Valter Galan – The management of their rural property and the production costs should always be focal points to the milk producer. Since milk is a long-term activity, we suggest that the costs and results management should always consider the one-year cycle of activity for a better assessment.
At the same time, the producer must follow selling price’s tendencies in the retail industry, which anticipate upward or downward movements in milk prices.