Colombian Dairy Market Faces Challenges from Buyer Concentration

A recent study conducted by researchers from the Universidad Piloto de Colombia has shed light on the oligopsonistic dynamics within the Colombian dairy market. The report indicates that the major companies purchasing milk in the country have significant influence over prices, which leaves the majority of producers, particularly small and medium-sized ones, with limited ability to negotiate better commercial terms.

The issue is exacerbated by the high level of informality in the market. According to the USDA's 2024 report titled 'An Overview of the Colombian Dairy Market', only 47% of the milk produced in Colombia enters the formal market. This is compounded by infrastructure limitations in processing, storage, and cold chain facilities, which further restrict the producers' ability to secure favorable sales conditions.

The perishable nature of milk forces many producers to sell it within 48 hours, diminishing their negotiating capacity. Fedegán, the Colombian Federation of Livestock Producers, notes that the low level of integration among producers, limited commercial channels, and weak collective bargaining also negatively impact the profitability of the dairy sector.

The broader debate on the future of Colombian dairying extends beyond the price paid per liter of milk. It encompasses structural issues such as market concentration, price transparency, and the need to enhance the negotiating power of milk producers.