Dairy Production Faces Cost Relief but Marketing Challenges Persist

The dairy industry is witnessing a mixed scenario concerning production costs. Although there has been a deflationary trend in the Input Cost Index (ILC), certain costs remain on the rise. Electricity costs increased by 6.2% in May, influenced by changes in consumption time bands and more expensive tariff flags. Additionally, mineral salt prices rose by 2.4% due to logistical issues in Morocco affecting phosphoric acid costs.

On a yearly basis, the ILC shows a 0.8% decrease, largely driven by a drop in silage and concentrated feed prices by 9.2% and 6.9%, respectively. However, the accumulated data for 2026 depicts a slight inflation of 0.33%, indicating some pressure on costs after a deflationary phase.

Despite reductions in certain expenses, marketing issues are impacting profitability. The price of milk paid to producers has fallen by approximately 9%, while the Consumer Price Index (IPCA) for milk and derivatives has increased by 3.3%. This disparity lowers operational margins and complicates the economic sustainability for primary producers.

Looking ahead to June, moderate inflation in the ILC is anticipated. A drop in oil prices might continue to benefit fuel costs, yet a potential appreciation of the dollar could exert pressure on fertilizer prices. The report also notes expected adjustments in mineral salt prices and grain valuation.

Producers are advised to continually monitor cost developments and utilize periods of reduced pressure to reassess purchases and financial planning, as the situation remains subject to change in the coming months.