Dairy and Products Annual Report

An Expert's View about Food , Beverages and Tobacco in Argentina

Posted on: 30 Nov 2011

Argentina dairy sector continues its recovery from the 2009/10 drought and breaking production records. Argentine milk production for CY2012 is projected at 12.45 million metric tons (MMT); a new record high, the result of very good weather during 2011 and in anticipation of relatively strong farmgate prices.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 11/8/2011 GAIN Report Number: Argentina Dairy and Products Annual Argentina Dairy and Products Annual Report Approved By: Melinda D. Sallyards Prepared By: Kenneth Joseph & Andrea Yankelevich Report Highlights: Argentina dairy sector continues its recovery from the 2009/10 drought and breaking production records. Argentine milk production for CY2012 is projected at 12.45 million metric tons (MMT); a new record high, the result of very good weather during 2011 and in anticipation of relatively strong farmgate prices. Total dairy exports are expected to grow significantly in response to the increase in milk production. Whole Milk Powder (WMP) is by far Argentina?s number one dairy export product. Commodities: Dairy, Cheese Dairy, Dry Whole Milk Powder Dairy, Milk, Fluid Dairy, Milk, Nonfat Dry Production: Post forecasts milk production for 2012 to reach a new record high of 12.45 MMT - equivalent to 12.09 billion liters. 2011 milk production is estimated at 11.99 MMT ? a revised increase of 920,000 MT over the previous forecast. This is due to the excellent weather conditions during the period Jan ? Sept 2011, abundant and high quality feed, and high farmgate prices. Milk production in 2012 is forecast to increase further but at a slower pace due to expected inflation that would lower returns. Most existing producers are expanding their operations; at the farm level dairymen are purchasing new equipment, improving nutrition, and using higher quality genetics which is mostly purchased in the United States. The current cost of feed encourages farmers to produce more milk (approximately 2.5 kg corn to produce one liter of milk). Despite the huge increase in production in 2011 (almost 13 percent increase compared to 2010) there are no new producers expected to come into the sector, mainly due to the significant capital investment required. Some of the smaller inefficient producers are switching over to soybean production. Current returns on soybeans are significantly lower compared to dairy, but crop production demands less investment and management. One of the biggest problems the Argentine dairy industry currently faces is labor. Costs due to salary agreements at the processing plants are continuously increasing and it is becoming more and more difficult to retain personnel at the farm. Currently, Argentina has approximately 2,15 million head in the dairy herd composed mostly of Holstein cows, and distributed mainly in the central region. The increase over 2010 follows a drought period in 2009/2010 when 30 percent of the calves died. Contacts estimate that due to the high margins, the dairy herd will grow up to 2,2 million head in 2012. The processing sector is dominated by 6 or 7 large firms that process about 60 percent of the total production. There are two big investments projected to be operational in 2013. One is a dry milk plant that will process 500,000 liters per day, and the other one is a dry whey plant that will free up capacity of 1 million liters a day of WDP production. Whole Milk Powder (WMP) production is expected to increase in 2012 to 330,000 tons. Most of the surplus milk produced in 2011 and 2012 will be processed into Whole Milk Powder, which will then be exported. The big increase in WMP production is the result of the surplus in fluid milk that occurred in 2011. The industry?s current processing capacity is approximately 14 million liters per day, running at full capacity during the spring. Cheese production is forecast to grow in 2012 to 575,000 tons, a small increase from 2011. Approximately 40 percent of total milk production will be processed into cheese, mostly soft and semi soft varieties. Some of the additional milk produced this year will also be processed into cheese. Consumption: Domestic consumption is forecast to expand moderately in 2012. The slight increase in consumption is linked to the increase in population (estimated at 40 million as per the 2010 National Census) and the introduction of new products. Argentina is among the largest per capita consumers of milk in the world at 210 liters per capita. Argentines consume the most cheese out of any dairy product. Post forecast this trend to remain the same. To stimulate consumption, the industry continuously introduces in the market new products, such as yogurts or milk with nutritional additives, and bio-engineered products. The average level of milkfat and skim solids content is 3.5 percent fat, 3.4 percent protein and 5 percent lactose. Trade: Exports Total exports of dairy products are expected to increase significantly in response to the anticipated increase in milk production. Most of the milk production surplus will be exported as WMP, given the limited opportunities for expanding sales in the domestic market. Argentina exports about 20 percent of its total milk production, mostly as WMP and cheese in second place. Contacts foresee that markets for Argentine exports will remain the same. Argentina exports mainly to Brazil, Venezuela and Algeria, followed by China and Chile. Argentina exports to Brazil under a bilateral MERCOSUR agreement. The agreement has been renewed and will be valid until November 2012, and Brazil has increased the monthly import quota of 3,600 MT for WMP. There is an agreement signed with Venezuela that sets an import quota of 6,315 MT under a preference system. According to contacts, Argentina?s exporting efforts are now geared to maintain current markets opened and also towards increasing exports to China and the Asian countries. WMP exports: is the top dairy product exported. The main markets are Venezuela, Algeria and Brazil for WMP and Brazil, Philippines and Chile for Nonfat Dry Milk. The total exports for the period of Jan ? Aug 2011 totaled US$ 473 million (equivalent to 112,122 MT). Cheese exports: The export market has the potential for growth but there are a limited number of companies with the expertise to export. The industry prefers to process excess milk output into WMP, and most of the cheese production is for domestic consumption. The types of cheeses currently exported are mainly hard and semi-hard, Individually Quick Frozen (IQF) and grated. Main markets for Argentine cheese are Brazil, Chile and the Russian Federation. Imports Argentine imports of dairy products are negligible. In 2011 Argentina imported mainly caseinates and casein derivatives from Denmark and the Netherlands. No big changes are expected in 2012. Stocks: Stocks of dairy products are estimated to be higher in 2011 and 2012 due to the significant growth in production. Policy: With the recent re-election of current President Cristina Fernandez de Kirchner, no major changes in the government?s policy are expected. The government controls dairy prices to guarantee the domestic market is well supplied and price increases are moderate. However large dairy processors have been authorized to increase prices for those products considered not essential, such as yogurt and cheese. The system implemented for retail price control is structured in 3 segments: Basic (massive products, includes milk), selective, and premium. The government allows maximum price increases for each segment. Exporters indicate that export permits are easy to obtain, there are no export taxes and no maximum export prices. Marketing: Farmgate prices remain relatively strong but margins are lower than in 2010 due to increased production costs. Costs are expected to continue to increase in 2012, partially due to increasing labor costs and high inflation. According to private sources, retail prices for dairy products have increased 38.5 percent during Jan- Sep 2011, while producers received an increase of 4.93 percent for their milk price during the same period (farmgate price per liter AR$ 1.42 in January and AR$ 1.49 in September). These increases in retail prices are observed even with the surplus milk production of the first 8 months of 2011. Production, Supply and Demand Data Statistics: Dairy, Milk, Fluid A 2010 2011 2012 rgentina Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: Jan 2010 2011 2012 USDA USDA O New Post fficial O N USDA ew Post fficial O New Post fficial Cows In Milk 2,100 2,100 2,100 2,150 2,200 Cows Milk Production 10,600 10,600 11,070 11,990 12,450 Other Milk Production 0 0 0 0 0 Total Production 10,600 10,600 11,070 11,990 12,450 Other Imports 0 0 0 0 0 Total Imports 0 0 0 0 0 Total Supply 10,600 10,600 11,070 11,990 12,450 Other Exports 22 18 25 16 18 Total Exports 22 18 25 16 18 Fluid Use Dom. Consum. 2,130 2,140 2,160 2,180 2,225 Factory Use Consum. 8,448 8,442 8,885 9,794 10,207 Feed Use Dom. Consum. 0 0 0 0 0 Total Dom. Consumption 10,578 10,582 11,045 11,974 12,432 Total Distribution 10,600 10,600 11,070 11,990 12,450 Dairy, Milk, Nonfat Dry A 2010 2011 2012 rgentina Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: Jan 2010 2011 2012 USDA New USDA New USDA New Official Post Official Post Official Post Beginning Stocks 10 10 10 7 9 Production 38 35 37 50 55 Other Imports 0 0 0 0 0 Total Imports 0 0 0 0 0 Total Supply 48 45 47 57 64 Other Exports 20 20 19 28 33 Total Exports 20 20 19 28 33 Human Dom. Consumption 18 18 18 20 21 Other Use, Losses 0 0 0 0 0 Total Dom. Consumption 18 18 18 20 21 Total Use 38 38 37 48 54 Ending Stocks 10 7 10 9 10 Total Distribution 48 45 47 57 64 Dairy, Dry Whole Milk Powder A 2010 2011 2012 rgentina Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: Jan 2010 2011 2012 USDA New USDA New USDA New Official Post Official Post Official Post Beginning Stocks 20 20 17 27 40 Production 220 210 260 315 330 Other Imports 2 0 1 0 0 Total Imports 2 0 1 0 0 Total Supply 242 230 278 342 370 Other Exports 170 128 200 222 250 Total Exports 170 128 200 222 250 Human Dom. Consumption 55 75 58 80 80 Other Use, Losses 0 0 0 0 0 Total Dom. Consumption 55 75 58 80 80 Total Use 225 203 258 302 330 Ending Stocks 17 27 20 40 40 Total Distribution 242 230 278 342 370 Dairy, Cheese Argentina 2010 2011 2012 Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: Jan 2010 2011 2012 USDA New USDA New USDA New Official Post Official Post Official Post Beginning Stocks 29 29 28 37 40 Production 540 540 555 555 575 Other Imports 4 3 4 3 3 Total Imports 4 3 4 3 3 Total Supply 573 572 587 595 618 Other Exports 45 45 55 50 55 Total Exports 45 45 55 50 55 Human Dom. Consumption 500 490 505 505 523 Other Use, Losses 0 0 0 0 0 Total Dom. Consumption 500 490 505 505 523 Total Use 545 535 560 555 578 Ending Stocks 28 37 27 40 40 Total Distribution 573 572 587 595 618
Posted: 30 November 2011

See more from Food , Beverages and Tobacco in Argentina

Expert Views    
Food Processing Ingredients   By Foreign Agricultural Service
Dairy and Products Annual Report   By Foreign Agricultural Service
Dairy & Products Annual Report 2012   By Foreign Agricultural Service
Processed Food   By U.S. Commercial Service
Food and Agricultural Import Regulations and Standards   By Foreign Agricultural Service