Uruguay's Dairy Industry: An In-Depth Analysis

Uruguay stands as a crucial player in the South American dairy sector, renowned for its modern infrastructure and strategic presence in the global market. The dairy industry is vital to Uruguay's national economy, with substantial contributions stemming from both milk production and processing.

Milk Production and Processing

In 2024, the dairy sector in Uruguay experienced a 10.6% decrease in production due to excessive rainfall. However, by 2025, the industry rebounded with a 5.7% increase in milk deliveries, exceeding 923 million liters in the first six months. Annually, milk production reached approximately 2.219 billion liters, with around 1.9 billion liters processed, highlighting Uruguay's strong processing infrastructure.

Cheese and Milk Powder Production

Cheese production in Uruguay is significant, with an annual output of about 100,000 tons. The country exports approximately 150,000 tons of milk powder and whey each year, with two-thirds being whole milk powder, contributing notably to export revenues.

Key Enterprises and Export Markets

Conaprole, Uruguay's largest dairy cooperative, plays a pivotal role in both production and processing. In 2024, Uruguay's dairy revenues reached USD 850 million, with key export markets including Brazil, Algeria, Russia, and China. In the first half of 2025, exports grew by 11%, nearing USD 500 million, driven predominantly by whole milk powder and butter.

Challenges and Opportunities

The dairy sector in Uruguay faces challenges such as climate volatility and labor disputes. Heavy rains in 2024 spurred climate impact initiatives. A trade agreement with the EU and Mercosur is anticipated to bring significant changes. Strategic developments, including land acquisitions, present opportunities for expanding production capacity.

Market Trends and Financial Developments

In July 2025, the industry observed a notable 9% increase in average dairy export prices. The average farm milk price reached $17.8 per liter in June 2025, providing financial improvements for producers. The financial situation of Uruguayan dairy farmers has improved, with bank debt decreasing to $190 million, the lowest in 30 months.

Strategic and Labor Events

Significant events include labor disputes involving Conaprole and AOEC, leading to interventions by the Ministry of Labour and Social Security. The sector faces potential plant closures and layoffs, necessitating strategic collaborations for stability.

Recent Developments

In April 2025, the price paid to milk producers rose by 11% to $18.05 per liter. Despite global volatility, Conaprole maintains stability with favorable price levels. The industry is under scrutiny with an investigation into milk powder exports to Brazil and discussions for a zero-tariff agreement with China.

Economic Challenges

Lease prices decreased by 9% due to declining profitability and adverse weather in 2024. The average lease price for dairy farms was approximately $242 per hectare annually.

Strategic Alliances and Agreements

As part of Mercosur, Uruguay stands to benefit from the EU agreement, potentially adding up to $30 billion in annual exports, with half in agribusiness products. However, Chile's import of whole milk powder from Uruguay declined, affecting overall imports.

Changes in Dairy Cattle and Land Use

The dairy herd expanded, but production decreased compared to the previous year. As of June 30, 2025, the milking herd grew, while heifers saw a significant decline. Dairy cattle stock was around 677,000 heads, slightly lower by 1% from the previous year. There was a 2% increase in milking cows, totaling 299,616 heads, but heifers decreased by 9.8%. The number of dairy producers declined, with 2,391 reported, signifying a loss of about 90 farms.

Regulatory Developments

The Ministry of Livestock, Agriculture, and Fisheries (MGAP) established new requirements for processing facilities, enhancing transparency, hygienic control, and quality.

Environmental Innovation

Uruguay's Conaprole is a finalist in the IDF Dairy Innovation Awards 2025 for its environmentally sustainable dairy approach. The Uruguayan dairy sector competes internationally in environmental innovation through sustainable practices in dairy farming.

Sector Dynamics

Uruguay's dairy industry is characterized by dual developments: promising international growth and significant labor conflicts. Statistics from the National Milk Institute indicate a 13% year-over-year increase in revenue, with exports totaling USD 678.9 million so far, and projections suggesting a potential record-breaking year in 2025.

Dairy Supply Trends

Uruguay's milk supply increased by 2.6% year-on-year in October 2025. This growth is noted to be slower than in prior months, suggesting a moderation in milk supply expansion. The industry relies heavily on both domestic consumption and exports.

Investment in Processing Facilities

Jugos del Uruguay is investing in a new dairy processing facility in Fray Bentos, as part of a broader strategy to boost dairy production and support local industry growth.

Uruguay is involved in an antidumping investigation by Brazil. The investigation by Brazilian authorities scrutinizes whether Uruguay has been exporting milk powder at below-market prices, potentially undercutting local producers.

Conaprole, a leading dairy cooperative in Uruguay, is preparing to implement a price adjustment. The decision comes during a period of significant tension in the harvest season, which is critical for the dairy industry in Uruguay.

Modified: 2025/12/08