Commodity Shuttle: Milk soars in the field in July and will weigh even more on the consumer’s pocket

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The price of long-life milk accumulates 19.4% increase in supermarkets in the last 30 days, according to Fipe (Economic Research Institute Foundation).

This account will be even greater when the new price of the field is incorporated by the industries and reaches the retail market.

In research by Cepea (Center for Advanced Studies in Applied Economics) the liter of milk should reach R$ 3.10 in the field this month, up 15% over last month. Until June, the real high was 19% in the year.

The price is at this level due to the supply, says Natália Grigol, a researcher at Cepea. Milk production has a long period cycle, and the sector is now experiencing the reflections of the past.

With no margins, producers stopped investing and many left the activity. The result was a drastic reduction in supply. In addition to these factors, production is in the off-season, when pasture conditions deteriorate.

With less milk, prices went up and producers started to have better margins, despite the fact that demand was not in the best moments due to the drop in consumer income.

In addition to the rise in milk prices in the field, producers are experiencing a reduction in costs, due to the drop in the commercialization value of the grains.

For the first time in 20 months, the exchange ratio of a bag of corn for milk dropped to 30 liters. Last year, there were 45. Even at the current level, the cost is still well above the 25 liters of 2019.

Natalia believes that July prices have peaked in the field, but there will not be a sharp drop in the coming months.

Supply is still tight and demand is unlikely to react much, despite the government’s temporary aid program.

The consumer will have to distribute the aid value among many expenses. For breakfast alone, the last 12 months’ cost of milk rose 37%; coffee, 77%, according to Fipe.

For the researcher, the reduction of the effects of this price shock will depend on the end of the off-season, in September, when the rains return, on the response of demand and on the continuity of the fall in the costs of producers. Since May, with the fall in corn prices, costs rise less in production.

For Natalia, this scenario is constant in all countries, since everything is linked to commodities. Grains and fuel inject costs into the sector. Hence the difficulty in controlling inflation. Those costs are at the base, she says.

The recovery of production in Brazil, even with specific investments, is difficult because the chain is disorganized. In addition, the sector does not receive the subsidies that producers in other countries have from governments.

One of Brazil’s advantages, in relation to foreign producers, is that the Brazilian dairy activity can operate even with little investment, according to the researcher.

The liter of milk on the spot, a market that industries use to adjust inventories by buying from intermediaries, reached R$ 4.54 in July. In May it was R$ 3.1, according to data adjusted for inflation by Cepea.

Milk World production has been falling in the main producing countries, with the exception of Argentina, where there was growth of 1% this year, in relation to the previous year. In Australia, there was a drop of 6%; in the European Union, 1%; in New Zealand, 6%; and in the United States, 1%.

milk 2 The data are from the USDA (United States Department of Agriculture), which does not believe in a rapid recovery of world production, due to hot and dry conditions in the European Union.

milk 3 Some countries, such as New Zealand and Australia, are improving production. Loss of profitability for Argentine producers and moderate growth in the US will not allow, however, an advance in world supply.

falls Agricultural commodities fell again this Thursday (21). In Chicago, the first soybean contract closed at US$14.19 a bushel (27.2 kg), down 2.1% on the day.

falls 2 In the same Chicago Stock Exchange, corn retreated 2.8%; and wheat, 1.4%. In New York, coffee fell 1%; sugar, 1.7%; and cotton, 1.4%.

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