Latin America’s Dairy Exports to Remain Regional Amid Mixed Production Trends
Source: DairyNews.today
Latin America’s dairy exports are expected to stay within the region despite shifting production dynamics, analysts say, as uneven milk output across countries influences trade patterns.
Monica Ganley, principal of Buenos Aires-based consultancy Quarterra and analyst for the Daily Dairy Report, highlighted a mixed production landscape across the region. While some nations are enjoying robust margins and expanding output, others face weather-related challenges, leading to constrained supply.
Mexico’s Market Dynamics
Mexico, the largest dairy market in Latin America and a crucial destination for U.S. exports, is seeing a divergence between official data and on-the-ground reports.
“Government figures show Mexican milk production rising steadily, including a 3.1% year-on-year increase in October,” Ganley said. “However, market participants report tighter milk volumes compared to earlier in the year.”
The tightening supply has pushed milk prices higher, keeping Mexico’s dairy imports strong despite a weaker peso. Nearly 30% of U.S. dairy exports by value are destined for Mexico, but potential geopolitical tensions loom.
The election of Donald Trump as U.S. president has raised concerns about possible trade disruptions. Trump has threatened tariffs of up to 100% on Mexican imports if immigration issues persist, prompting Mexico to warn of retaliatory measures.
Brazil Faces Production Hurdles
In Brazil, milk production began the year strong but has since faltered due to adverse weather, including flooding in the south and droughts coupled with wildfires in central regions. By Q3 2023, year-over-year production had dipped 0.6%.
“Weaker domestic production has kept Brazil’s demand for dairy imports robust,” Ganley said. However, much of this demand is being met by fellow Mercosur members Argentina and Uruguay, rather than the U.S.
Recovery in Argentina and Uruguay
Argentina and Uruguay, Latin America’s largest dairy exporters, have seen production recover after significant early-year declines.
In Argentina, soaring inflation initially drove producers to cut output, but rising milk prices and improved margins have since spurred expansion. Uruguay experienced weather-related setbacks earlier in the year but has seen profitability improve, supporting a near-complete recovery in production.
Regional Outlook
Despite improvements among exporters, much of the region’s dairy production is expected to remain within Latin America as rising demand from key importers like Mexico and Brazil continues to outpace supply.
“Even with strengthening production among exporters, the regional demand for dairy products is likely to keep trade largely confined to Latin America,” Ganley noted.
Analysts expect the interplay of rising domestic demand, production recovery, and geopolitical risks to shape the regional dairy market heading into 2024.
Mexico’s Market Dynamics
Mexico, the largest dairy market in Latin America and a crucial destination for U.S. exports, is seeing a divergence between official data and on-the-ground reports.
“Government figures show Mexican milk production rising steadily, including a 3.1% year-on-year increase in October,” Ganley said. “However, market participants report tighter milk volumes compared to earlier in the year.”
The tightening supply has pushed milk prices higher, keeping Mexico’s dairy imports strong despite a weaker peso. Nearly 30% of U.S. dairy exports by value are destined for Mexico, but potential geopolitical tensions loom.
The election of Donald Trump as U.S. president has raised concerns about possible trade disruptions. Trump has threatened tariffs of up to 100% on Mexican imports if immigration issues persist, prompting Mexico to warn of retaliatory measures.
Brazil Faces Production Hurdles
In Brazil, milk production began the year strong but has since faltered due to adverse weather, including flooding in the south and droughts coupled with wildfires in central regions. By Q3 2023, year-over-year production had dipped 0.6%.
“Weaker domestic production has kept Brazil’s demand for dairy imports robust,” Ganley said. However, much of this demand is being met by fellow Mercosur members Argentina and Uruguay, rather than the U.S.
Recovery in Argentina and Uruguay
Argentina and Uruguay, Latin America’s largest dairy exporters, have seen production recover after significant early-year declines.
In Argentina, soaring inflation initially drove producers to cut output, but rising milk prices and improved margins have since spurred expansion. Uruguay experienced weather-related setbacks earlier in the year but has seen profitability improve, supporting a near-complete recovery in production.
Regional Outlook
Despite improvements among exporters, much of the region’s dairy production is expected to remain within Latin America as rising demand from key importers like Mexico and Brazil continues to outpace supply.
“Even with strengthening production among exporters, the regional demand for dairy products is likely to keep trade largely confined to Latin America,” Ganley noted.
Analysts expect the interplay of rising domestic demand, production recovery, and geopolitical risks to shape the regional dairy market heading into 2024.
