Brazil: Milk Supply Growth Expected to Slow Down
Sourse: dairynews.today
Rabobank anticipates that the impressive growth in Brazil's milk production will decelerate in the final quarter of 2025.
The country experienced a historic boost in the first half of the year, with a 6.8% year-on-year increase, the highest in more than a decade. This surge was supported by favorable weather conditions, reduced input costs like corn and soy, and significant investments by large dairies.
However, Rabobank warns of a potential slowdown towards the year-end. According to RaboResearch's latest report, the annual production growth forecast has been adjusted to 6.5%, with an expected rate of 6.2% in the second half of the year. The strong "base effect" fr om the second quarter and margin stabilization may lim it expansion, yet production levels will remain high compared to previous years. On the commercial front, internal milk prices are showing moderate declines. The average price at the source fell from BRL 2.82 per liter in April to BRL 2.65 in July, driven by firmer than expected demand. However, exports decreased by 6% year-on-year in the first seven months, while imports, especially of milk powder and cheese, remained high.
The strength of the Brazilian real and internal prices have spurred these purchases from Mercosur partners, adding pressure to the dairy trade balance. Meanwhile, the Brazilian economy, although with lower projected GDP growth than in 2024 (2.18% versus 3.4%), maintains stable employment and food consumption without significant setbacks, partially sustaining domestic demand. Looking ahead to the fourth quarter, Rabobank notes that an abundant supply, coupled with slowing demand, could result in further price drops in the origin market. Producers and industries face the challenge of managing volatility in a scenario of milk abundance, tight margins, and mixed commercial prospects.
However, Rabobank warns of a potential slowdown towards the year-end. According to RaboResearch's latest report, the annual production growth forecast has been adjusted to 6.5%, with an expected rate of 6.2% in the second half of the year. The strong "base effect" fr om the second quarter and margin stabilization may lim it expansion, yet production levels will remain high compared to previous years. On the commercial front, internal milk prices are showing moderate declines. The average price at the source fell from BRL 2.82 per liter in April to BRL 2.65 in July, driven by firmer than expected demand. However, exports decreased by 6% year-on-year in the first seven months, while imports, especially of milk powder and cheese, remained high.
The strength of the Brazilian real and internal prices have spurred these purchases from Mercosur partners, adding pressure to the dairy trade balance. Meanwhile, the Brazilian economy, although with lower projected GDP growth than in 2024 (2.18% versus 3.4%), maintains stable employment and food consumption without significant setbacks, partially sustaining domestic demand. Looking ahead to the fourth quarter, Rabobank notes that an abundant supply, coupled with slowing demand, could result in further price drops in the origin market. Producers and industries face the challenge of managing volatility in a scenario of milk abundance, tight margins, and mixed commercial prospects.
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