Brazil’s Milk Producers See Margins Shrink as Costs Rise
Brazil’s Selic interest rate remains at 14% a year, equivalent to a real interest rate of 9.30%. Across the agribusiness sector, courts recorded 474 requests for judicial recovery in the first quarter, 21.9% more than in the same period of 2025. Corn and soybean meal have also begun to add to dairy production costs, according to a sector outlook cited by eDairyNews.
Foreign supply increased for a sixth consecutive month. Brazil imported the equivalent of 224m litres of milk in August, 39.6% more than a year earlier. Almost 90% came from Mercosur countries: Argentina accounted for 66.3% of purchases and Uruguay for 23%. Powdered milk represented three-quarters of the total, with whole milk powder the only major imported category still recording growth, up 7.9%.
The dairy trade balance showed a deficit equivalent to 219m litres in August. The imported volume entered the Brazilian market as domestic demand was showing signs of weakening. The figures cover milk-equivalent quantities rather than only liquid milk.
Brazil’s gross domestic product expanded by 0.5% in the second quarter, supported by agriculture, which grew 2.8%. Household consumption declined by 0.4%, however, while household indebtedness reached 82%, its sixth consecutive monthly record. Long-life milk accounts for 57% of retail dairy volume. Its price has risen 27.3% this year, and the category represented 92% of the total volume lost between January and August. Sales fell 3.3% in litres and 3.7% in real revenue.
Price projections differed among the state Conseleite councils. Paraná projected a 0.4% decline in the price paid for milk delivered in August, while Rio Grande do Sul forecast a 1% fall and Santa Catarina a 1.7% decrease. Minas Gerais projected a 1.2% increase. In the spot market, prices fell in every state tracked during the first half of September, and the Centre for Advanced Studies in Applied Economics indicated that the quarter was likely to close at a weaker level.
International dairy prices have recovered unevenly. The Global Dairy Trade overall index posted four successive increases of 1.5%, 0.1%, 2.3% and 0.9%, partly reversing a 4.9% decline recorded on July 7, but remaining 7.5% below its March peak. At the September 1 auction, skimmed milk powder rose 5.3% to $3,695 a tonne, its highest price since 2022. Whole milk powder was almost unchanged, while butter fell 0.8%, anhydrous milk fat declined 1.3% and cheddar dropped 6.6% to its lowest price since 2023. Embrapa described the movement as a shift in value among dairy products rather than a broad-based increase.
Embrapa also identified a forecast super El Niño between October and December 2026 as a risk to pasture and feed availability, with possible effects extending to March 2027. The sector outlook said producers were still receiving relatively high prices, but that the margin of safety seen in the first half was narrowing as production costs increased.
