Stability in Brazil's Dairy Sector Boosts Confidence Among Producers
The dairy industry in Rio Grande do Sul, a key region in Brazil, is witnessing a period of stability, according to Darlan Palharini, the executive secretary of Sindilat/RS. The current market conditions have been favorable for producers, the industry, and consumers, as prices for dairy products have not seen significant increases in 2026. This period of stability follows a recovery observed in April, with May and June continuing this trend, leading to greater predictability in the sector.
Despite margins being tighter compared to 2024 and the first half of 2025, producers are facing a less challenging environment than during times of significant price fluctuations. A major contributing factor is the stability in costs for key feed components, such as corn and soybean meal, which have not seen significant price increases.
Indicators from Farsul, the Federation of Agriculture of the State of Rio Grande do Sul, support this sentiment. The Inflation Index for Raw Milk Production (ILC) recorded a deflation of 0.72% in May, attributed to exchange rate stability and reduced impacts from Middle Eastern conflicts on international oil prices. The decrease in fuel and fertilizer costs was also crucial in achieving this outcome.
However, not all cost components have decreased. Electricity costs rose by 6.2% in May due to changes in consumption bands and higher tariff flags. Additionally, the price of mineral salt increased by 2.4%, impacted by logistical challenges in sourcing phosphoric acid from Morocco.
Throughout 2026, the cost index has increased by 0.33%, indicating some pressure returning after a period of deflation. Over the past 12 months, the index still shows a 0.8% decrease, mainly due to reduced prices for silage and concentrates, which fell by 9.2% and 6.9%, respectively.
Challenges remain, particularly the significant presence of imported powdered milk from Argentina and Uruguay, which accounts for nearly 10% of national consumption, up from about 2% in 2022. Despite evidence of dumping practices, no additional tariffs have been implemented for these imports.
Farsul has also warned about the market conditions: although some costs have decreased, the price paid to producers has dropped by approximately 9%, while the Consumer Price Index (IPCA) for milk and dairy products rose by 3.3%, pressuring operational margins and affecting primary producers' exchange relationships.
