Brazil's December average milk price decline sharply

Publish time: 10th January, 2014      Source:
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January 10, 2014

Brazil''s December average milk price decline sharply


Due to the weak demand and the increase of milk purchases in almost all Brazilian states except in Rio Grande do Sul and Santa Catarina, the average milk price paid to producers wrapped up December with sharp decreases, confirming the players'' expectations.



In December, the average gross price in Brazil (including freight and taxes) closed at BRL1.0416 (US$0.30) per litre, tumbling 5.4% compared to the previous month. As for the net price (neither freight nor taxes are included), the average was BRL0.9602 (US$0.26) per litre in December, for a sharp decrease of 5.8% in relation to November. These averages are calculated by Cepea (research centre linked to Sao Paulo University) and are weighted by the volume purchased in Goiás, Minas Gerais, Paraná, Rio Grande do Sul, Santa Catarina, São Paulo and Bahia.


In spite of price drops, levels continue high comparing to those in the year before. Considered an atypical year, 2013 registered milk price rises in almost all months – in August, the average price was the highest over the last six years in real terms (disregarding the inflation in the period). Quotes kept the upward trend in the following months and, in October, hit the highest levels of the entire Cepea series. The increase is attributed mainly to the heated domestic demand.


In the last two months of the year, rains favoured the quality of pastures and the consequent increase of milk purchases, which hit a new record. From October to November, the Index for Milk Purchases (ICAP-Leite Cepea) upped 3.51%. São Paulo, Goiás and Bahia States were highlighted in the period, with increases of 8.15%, 7.12% and 6.92%, respectively.


Besides weather conditions, several milkproducers invested in farms due to high price levels registered over the last months, which favoured to push up even more the supply available currently. The higher level of milk purchases, in turn, favoured the increase of stocks in almost all regions surveyed by Cepea, resulting in lower needs to purchase from the industry.


In the by-products market, quotes have also moved down, due to high stocks and the weak demand for dairy products. Price averages of ultra-heat treatment (UHT) milk and mozzarella cheese traded in the wholesale market of the Greater São Paulo in the partial December (until Dec 26) closed at BRL2.013 (US$0.84) per litre and BRL12.326 (US$5.16) per kilogramme, downing 7.62% and 3.47%, respectively, compared to averages in November. This research occurs daily with dairy companies and wholesalers, and is financially supported by OCB (Brazilian Cooperative Organization) and CBCL (Brazilian Confederation of Dairy Cooperatives).


In December, the gross price of milk paid to producers downed in all states surveyed by Cepea. The most significant decrease was verified in Goiás and Santa Catarina, of 7.23% in both regions.