Brazilian Dairy Farmgate Prices Soar Despite Slowing Growth

In March, Brazilian dairy farmers saw an average farmgate price of BRL 2.3924 (USD 0.48) per litre, according to Cepea. This marks a 10.5% increase in real terms from February. The consistent rise in prices has now extended over three consecutive months, although competition among processors for raw milk has started to ease.

The supply shortage remains a key issue, with the Cepea Milk Production Index (ICAP-L) showing a 3.9% decline in March, contributing to an 11.1% cumulative decrease for the first quarter. This decline is attributed to seasonal factors and reduced investment in the dairy sector. As processors vie for diminishing volumes, farmgate prices have been driven higher, though this trend is showing signs of softening.

On the cost front, the Effective Operating Cost for dairy producers increased by 0.46% in March and by 2.11% over the quarter. Additionally, prices of dairy byproducts rose, with UHT milk prices climbing 18.3% and mozzarella prices up 6.1%, based on a Cepea survey supported by the Organisation of Brazilian Cooperatives (OCB).

Imports of milk surged by 33% in March, reaching 604 million litres of milk equivalent. This increase highlights the ongoing tight supply situation in the domestic market. Looking ahead, Cepea forecasts that the upward trend in prices may lose momentum starting in May, as consumer resistance to high retail prices grows and domestic production is expected to recover during the May-June period.