Argentina's Dairy Sector Struggles Amid Economic Turmoil, USDA Report Finds
Source: The DairyNews
The Argentine dairy industry is facing severe disruptions this year as ongoing economic instability severely impacts production and market dynamics, according to a recent report from the United States Department of Agriculture Foreign Agricultural Service (USDA FAS). High inflation and stringent government-imposed foreign exchange controls are cited as key factors exacerbating the industry's challenges.
The report details how Argentine dairy farmers, who rely heavily on domestic inputs such as feed, machinery, and fuel, are under increasing financial pressure. This has led to a notable reduction in milk production, with a 13% decline recorded from January through June 2024 compared to the same period in 2023. Total milk production for 2023 was 11.7 million tons, but projections for 2024 anticipate a decrease to 10.8 million tons.
Despite domestic hurdles, the depreciation of the Argentine peso has unexpectedly boosted the competitiveness of Argentine dairy products internationally. This currency effect has lowered prices for foreign buyers, resulting in a 10% increase in dairy exports in the first five months of 2024. Cheese exports, in particular, are expected to rise from 85,000 tons in 2023 to 100,000 tons in 2024.
On the domestic front, the situation remains grim. Rising production costs have significantly increased the prices of dairy products, eroding consumer purchasing power amidst rampant inflation, which is nearly 300% annually for food and non-alcoholic beverages. As a result, domestic fluid milk consumption is projected to fall by 7% to 1.6 million tons in 2024.
In response, the Argentine government has implemented several policies aimed at stabilizing the dairy sector. These include the reopening of agricultural export registrations and the introduction of a "blended" exchange rate for agricultural exports that combines official and unofficial rates, providing a more favorable context for exporters.
However, the effectiveness of these governmental measures is still uncertain, given the broader economic challenges. While export-oriented strategies have shown some positive outcomes, efforts to mitigate inflation have had mixed results, continuing to constrain growth in domestic dairy demand. The ongoing crisis highlights the volatile environment in which Argentine dairy farmers operate and the complex interplay between domestic economic policies and global market forces.
Despite domestic hurdles, the depreciation of the Argentine peso has unexpectedly boosted the competitiveness of Argentine dairy products internationally. This currency effect has lowered prices for foreign buyers, resulting in a 10% increase in dairy exports in the first five months of 2024. Cheese exports, in particular, are expected to rise from 85,000 tons in 2023 to 100,000 tons in 2024.
On the domestic front, the situation remains grim. Rising production costs have significantly increased the prices of dairy products, eroding consumer purchasing power amidst rampant inflation, which is nearly 300% annually for food and non-alcoholic beverages. As a result, domestic fluid milk consumption is projected to fall by 7% to 1.6 million tons in 2024.
In response, the Argentine government has implemented several policies aimed at stabilizing the dairy sector. These include the reopening of agricultural export registrations and the introduction of a "blended" exchange rate for agricultural exports that combines official and unofficial rates, providing a more favorable context for exporters.
However, the effectiveness of these governmental measures is still uncertain, given the broader economic challenges. While export-oriented strategies have shown some positive outcomes, efforts to mitigate inflation have had mixed results, continuing to constrain growth in domestic dairy demand. The ongoing crisis highlights the volatile environment in which Argentine dairy farmers operate and the complex interplay between domestic economic policies and global market forces.
