Argentine Dairy Sector Struggles Amid Economic Challenges

The Argentine dairy industry is experiencing a significant downturn, as internal consumption fell by 9.7% in 2024. Producers are urgently seeking ways to bolster sales amidst economic challenges. According to Luciano Di Tella, a representative from Lácteos Yatasto, exporters are struggling with operational dynamics that align with the prevailing economic conditions.

In 2023, the sector managed to export products worth USD 1.5 billion. However, the situation in 2024 has been notably more challenging due to the unfavorable exchange rates of the dollar, making exports less viable. Additionally, the devaluation of the Brazilian real has compounded issues, affecting Argentina's key export market.

The Impact of Economic Policies

Highlighting a potential solution, Di Tella advises the reduction of VAT on dairy products from 21% to 10.5%. This measure could help align costs with other commodities like grains and meats, aiding both producers and consumers. Many small and medium-sized enterprises are also turning to direct consumer sales to offer lower prices.

The dairy industry is currently navigating an uncertain future. Given the challenges in both the domestic and export markets, producers might face declining prices. While there hasn't been an increase in dairy prices for over six months, the sector remains under pressure to maintain profitability.

Potential Risks from Imports

As Argentina ponders changes in its import policies, there is concern particularly regarding the influx of specialty dairy products. The competition with large European producers could place Argentine fine cheese makers at a disadvantage, underscoring the need for strategic policy interventions.