Prepare the Pocket: milk should remain expensive in the coming months

The high prices of main products that are part of the Brazilian power is surprising many consumers. After the crisis of supply of beans, whose price rose 41.78% from May to June this year, according to the consumer price index (IPCA), now is the time of milk weigh on the budget. Last month, the liter of milk long life was 10.16% more expensive, according to the IPCA. Currently the product is sold for more than $ 4 real retail.
According to the Center for advanced studies in applied economics (Cepea), it is possible that the milk get more expensive and there is no return to the forecast level of prices that Brazilians know, around r $ 2 per litre. "When supply of milk to increase because of the rainy season, in September or October, the retail price of the product may fall, but should still continue at high levels, especially if compared with the figures of last year," says Natalia Salaro Grigol, Cepea markets analyst.
The reasons for the rising price of milk and its derivatives are in the field. The reasons are basically the unfavorable climate and the increased cost of animal feed, which caused drop in milk supply. With the economic downturn and the reduction of consumer purchasing power, the demand must also be pressed. "As the milk is very expensive, there is the movement of consumers buying milk powder, which has a higher yield. The consumer is going to look for alternatives to not pay for long-life milk, "says Natalia.
Brazilian milk
Brazilian milk production retreated. According to the IBGE, in the first quarter of 2016 the procurement of raw milk from the dairy was a total of 5.86 billion liters. This number represents a retreat from 6.8% in relation to the four quarter last year and 4.5% drop compared with the first quarter of 2015.
With the reduction in the supply of milk, the price paid to the producer came forward. The price recorded record 1.2165 R$ per litre in June 2016, up 5.14% in relation to the price of May and 18% higher than the rate recorded in June 2015. Even so, the producer''s profit margin did not advance due to the rising cost of animal feed. "As 2015 was very difficult, with high production costs and low price paid for the raw materials, the producers had a hole in the budget," says the analyst of the Cepea. "A lot of people who might be profiting is redoing or plugging the hole last year."
Why milk production fell?
The year 2015 was dairy farming crisis so many producers migrated from milk production to other businesses, with a reduction in the number of dairy cows and investment in cattle, for the production of beef, or investment in agriculture. With this, the production of milk is falling back. "This transition to cattle impacts cutting milk production," says Natalia. "And has a current movement of slaughter of cows that may reflect on the next harvest [milk]."
In addition, the climate has been a villain for dairy farming. Many regions suffered from a severe drought that has damaged the grasslands. With that, the animals had food compromised and consequently recorded lower milk production. In addition to pasture, the cows also feed on the feed, that has as main ingredients soya and maize. The problem is that the drought also hurt crops of these grains, production fell and the prices of soybeans and corn are also expensive. This scenario has led the life of a rancher who had to spend more to feed dairy cows. "Most likely the beans will keep valued," says Natalia. "The fall in maize production will still impact on milk production."
Milk products
The market for derivative products, such as cheese and yogurt, also suffer from the reduction in the supply of milk. According to the Cepea, a pound of mozzarella at Costco climbed about 30% of the accumulated this year and reached R$ 18.32. "To produce a pound of mozzarella, the industry needs 8 to 10 liters of milk. With a milk quality, the industry will need 15 liters, "says Natalia.
According to the IPCA of June, all milk products recorded high. Encareceu butter 6.35%, the price of condensed milk went up 3.08 percent, 2.60% milk powder and cheese is 1.85% more expensive, while the sour cream, yogurt and dairy drinks had a valuation below 1%. "If the price is affordable, consumers will buy butter. If they lose the purchasing power, will buy margarine. The dairy sector has a loyal demand, so the purchasing power of the Brazilian will decide the chain''s growth, "says Natalia.
Brazilian production and the international market
The Brazil ranks fourth in the world rankings of milk production. However, the dairy sector suffers from the lack of investment, low productivity and problems of quality of raw material. The Brazil has an average productivity of 4.5 liters of milk per cow per day. In Argentina and in Uruguay, for example, the daily average is 12 liters per cow. In Europe, these numbers come to 18 litres per cow per day. "The zootechnic rates are so low because in many areas the ranchers have no knowledge about management of pasture, forage cultivation, genetics of the herd and specialized production," says the analyst.
Historically, Brazil is a Country milk importer and export little. According to an analyst at Cepea, it is possible to grow in the dairy chain, but it will be necessary to improve the quality of milk. "Currently, quality is an obstacle to the Brazil move to the condition of exporter," says Natalia.
Marcelo Martins, Executive Director of Dairy Alive (Brazilian Association of dairy products), the Brazilian dairy sector is experiencing a moment of low supply and consequent fall in the volume of exports. However, he believes that the opening of foreign markets is the bet of the sector to recover the deficit of the trade balance. "There is the need to maintain the dairy promotion work for when the external conditions are favorable and not find that for exports," says Malik.
In 2016, the focus of the Dairy''s at work Live access to markets and the trade promotion for export. According to Malik, some results have already been seen in 2015. "The Russian market is consolidating and there is the prospect of enabling companies to China. This country represents 9% of world imports of butter; 3% and 21% of milk powder ", says the ceo. The Mexico may also be an important opportunity for this year, depending on the progress of tariff negotiations on Economic Complementation Agreement (ACE 53).