February 18, 2014
Brazil''s milk prices paid to producers down for three consecutive months
For the third month in a row, Brazil''s milk prices paid to producers decreased in almost all regions surveyed by the Centre for Advanced Studies on Applied Economics (CEPEA), which are attributed to the increase of milk purchases and the moderated demand since late 2013.
The increase of the purchased volume and milk price drops are common in this time of the year, due to the season period and lower consumption, mainly because of school vacation.
In January, the average gross price in Brazil (Goias, Minas Gerais, Parana, Rio Grande do Sul, Santa Catarina, Sao Paulo and Bahia States - including freight and taxes) closed at BRL0.9951 (US$0.042) per litre, for a decrease of 4.46% compared to the previous month. Despite the price drop, the current average is 7.3% above that in January 2013 in real terms. As for the net price (neither freight nor taxes are included), the average was BRL0.9180 (US$0.38) per litre in January, dropping 4.39% in relation to December 2013.
According to CEPEA''s survey, the price drop was already expected by agents and many indicate that dairy companies are oversupplied. The raw material surplus seems to be allocated for ultra-heat treatment (UHT) milk and milk powder production in some regions in Brazil.
The Index for Milk Purchases (ICAP-Leite Cepea) upped 1.53% in December 2013 compared to the previous month and it is at the highest level of CEPEA series, started in 2004. Among seven states surveyed by CEPEA, only Sao Paulo registered a decrease, of 1.84%, because dairy companies had high stocks.
In the by-products market, quotes have also dropped. In the wholesale market of the Greater Sao Paulo, UHT milk prices moved down 8.13% in relation to December. Mozzarella cheese values decreased 3.04% in the same period.