Dairy and Products Annual 2012

An Expert's View about Dairy Products in Brazil

Posted on: 9 Nov 2012

Post forecasts fluid milk production to increase by three percent in 2013, supported by higher domestic demand.

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: 10/15/2012 GAIN Report Number: BR0822 Brazil Dairy and Products Annual Annual Dairy Report Approved By: Robert Hoff, Agricultural Counselor Prepared By: Priscila Ming, Agricultural Specialist Report Highlights: Post forecasts fluid milk production to increase by three percent in 2013, supported by higher domestic demand. Post revised production and import estimates for milk and milk products for 2012 to reflect new estimates. Although Brazil imports milk powders from MERCOSUL partners, the United States continues to be competitive in other dairy categories such as ingredients which Brazil does not manufacture. Page 1 Commodities: Dairy, Milk, Fluid Production: Post forecasts fluid milk production to increase by three percent in 2013 and to reach a record of nearly 32 million metric tons (MMT). The increase in production is supported mostly by stronger domestic demand due to increased consumer disposable income. However, uncertainty remains regarding Brazilian dairy exports as the appreciation of the Brazilian currency makes Brazilian dairy products uncompetitive in world markets. Post revised 2012 production and export estimates for the Brazilian dairy sector to reflect new estimates made by trade sources. The Southwest and South are the top milk producing regions in Brazil. Santa Catarina state (South region) has been the leading state in milk production for the last five years, according to the Brazilian Association of Milk Producers (Leite Brasil). Over this period, milk production has grown 13 percent compared to other important milk producing states such as Paraná (11.6 percent), Rio Grande do Sul (7.2 percent), São Paulo (3.8 percent), Minas Gerais (3.6 percent) and Goias (1.4 percent). The national average of growth for milk production was 5.5 percent in the same period. The Brazilian government (GOB) does not maintain milk stocks, so the strong demand for milk products coupled with a late start in the producing season led to fewer products available for export. Consumption: Consumption of fluid milk is forecast to increase by nearly three percent in CY 2013. Brazilian dairy per capita consumption is estimated at 150 liters per year. Flavored milk drinks are expected to have the strongest growth in both retail volume and current value terms within dairy products in 2012. This is the result of a growing demand for convenient and nutritional products among children and younger consumers. Long-life/UHT milk accounts for the most sales within consumer-ready fluid milk products, and is expected to approach US$ 5.5 billion (R$11 billion) - or almost 44 percent of total sales of drink milk products in 2012. Whole long life/UHT milk is the most popular with a retail value share of 75 percent, followed by non-fat long-life/UHT milk and semi-skimmed long-life/UHT milk with shares of 19 percent and six percent, respectively. In particular, the Southeast accounts for around 70 percent of total consumption of long-life/UHT milk. Price: Page 2 The average fluid milk prices paid to producers have decreased four percent in 2012 compared to the same period in the previous year. Higher production and sporadic stocks have caused prices to decrease slightly in 2012. This situation has not benefitted are paying the same prices as they did in 2011. It is expected that prices paid to local producers will return to 2011 levels, considering possible increases in production costs for 2013. Table 1 - São Paulo: Monthly Average Price Received by Producers for Fluid Milk per Liter, Jan-Sep 2009-12: Month 2009 2010 2011 2012 Jan 0.6331 0.7125 0.7676 0.803 Feb 0.6358 0.7393 0.4461 0.795 Mar 0.6385 0.7415 0.7963 0.811 Apr 0.6536 0.7492 0.8253 0.818 May 0.6871 0.74 0.868 0.82 Jun 0.7378 0.7456 0.8996 0.814 Jul 0.8189 0.756 0.9247 0.895 Aug 0.8171 0.7485 0.9244 0.825 Sep 0.7862 0.7425 0.9395 0.825 Year Average 0.712 0.7417 0.8579 0.8229 (in U.S.$) 0.36 0.37 0.43 0.41 Source: Cepea Average Exchange rate for Sep 2012: US$ 1.00 = R$ 2.00 Trade: Brazil imports insignificant volumes of fluid milk and packaged UHT milk imports are sold by companies from Uruguay, Chile and Argentina with commercial interests in Brazil. Stocks: Current milk and dairy product stocks held by major dairy companies are considered operating stocks to meet short term demand for their products. There are no official government stocks of milk or milk products in Brazil. Policy: Page 3 The Brazilian Government published a new law to inform milk producers about milk prices paid by the dairy companies. Law 12.669, promulgated on June 20, 2012, established that dairy companies need to inform milk producers the value paid per liter of milk by the 25th of each month prior to delivery of the product. In the past, milk producers were informed of the price one month after the delivery of the product. Milk producers are entitled to state dairy development programs designed to increase productivity through pasture improvement and animal genetics. State government programs are also developed to assist and improve social and economic conditions of small milk producers. However, the most important state subsidy program to milk producers is the exemption of the state value-added tax (ICMS) on the sale of milk for producers and cooperatives. This benefit, however, is only available to a few states in Brazil; located in the Center-West and South. In addition to these federal and state programs, milk producers also benefit from financing programs from large dairies, which are specifically designed to increase milk productivity and quality. These programs are only available for those integrated milk producers with integrated operations. Page 4 Production, Supply and Demand Data Statistics: PSD: Dairy, Milk and Fluid (HTS: 0401.10; 0401.20) Da iry, Milk, Fluid B 2011 2012 2013 razil Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: Jan 2011 2012 2013 USDA New USDA New USDA New Official Post Official Post Official Post Cows In Milk 18,200 19,200 18,600 19,900 20,450 (1000 HEAD) Cows Milk Production 30,610 30,715 31,300 31,491 32,380 (1000 MT) Other Milk Production 0 0 0 0 0 (1000 MT) Total Production 30,610 30,715 31,300 31,491 32,380 (1000 MT) Other Imports 6 14 5 15 16 (1000 MT) Total Imports 6 14 5 15 16 (1000 MT) Total Supply 30,616 30,729 31,305 31,506 32,396 (1000 MT) Other Exports 0 0 0 0 0 (1000 MT) Total Exports 0 0 0 0 0 (1000 MT) Fluid Use Dom. Consum. 11,316 11,429 11,515 11,716 12,000 (1000 MT) Factory Use Consum. 18,720 18,720 19,200 19,200 19,796 (1000 MT) Feed Use Dom. Consum. 580 580 590 590 600 (1000 MT) Total Dom. Consumption 30,616 30,729 31,305 31,506 32,396 (1000 MT) Total Distribution 30,616 30,729 31,305 31,506 32,396 (1000 MT) CY Imp. from U.S. 0 0 0 0 (1000 MT) CY. Exp. to U.S. 0 0 0 0 (1000 MT) TS=TD 0 0 0.0 Page 5 Commodities: Dairy, Cheese Production: Note: There are no official statistics on production and consumption of cheese in Brazil. Post production estimates for cheese are based on trade sources and also include “informal” cheese production. Post forecasts cheese production to increase by three percent in 2013. As reported last year, this increase is boosted mostly by estimated strong domestic demand for cheese, principally from the fast-food sector. Post revised cheese production in CY 2012 which is estimated to increase by three percent. Consumption: Post forecasts cheese consumption to increase by nearly three percent in 2013 supported by strong consumer and industry demand. Local companies continue to innovate and copy European style cheeses to attract the consumers that are experienced with these types of cheeses. Packaged hard cheese is expected to experience the fastest current value growth, reaching 18 percent in 2012, besides accounting for 39 percent of total sales. Such products are commonly used in Brazilian cooking or to prepare snacks in which the most popular sorts of cheese are mozzarella and yellow cheese (“queijo prato”). Within unprocessed cheese, mozzarella and “queijo prato” accounted for a 74 percent share of the total 2012 volume. Soft cheese is also expected to perform well in 2012 with a current growth in sales of 18 percent. This is driven by the strong performance of white cheese (“queijo fresco”) and ricotta, which are perceived as being healthier than the popular mozzarella and “queijo prato” hard cheeses. Fine cheeses such as Emmental, Gruyère, Gorgonzola, Brie and Camembert are still niche products in Brazil due to their high unit prices. Spreadable processed cheese accounts for 19 percent of total sales in 2012, in which spreadable processed cheese (“requeijão”) represents the bulk of these sales. Reconstituted cheese leads sales of this category with an expected value share of 92 percent for 2012 while cream cheese accounts for the rest. In general, such products are very popular due to the local tradition of eating “requeijão” with French bread for breakfast or brunch. Prices: Page 6 Average wholesale prices of cheese manufactured in Brazil by major types are: Table 3 Type US$/Kilogram Minas (fresh farmer type) 12.75 Mozzarella 17.93 Queijo Prato (yellow cheese) 10.58 Provolone 21.20 Parmesan 32.55 Notes: (1) Prices for Sao Paulo market, as of 10/01/2012. (2) Average Exchange Rate for Oct 2012: US$ 1.00=R$2.00 Trade: Due to strong domestic demand for cheese products, cheese imports in 2011 reached 39,000 metric tons (MT). Cheese imports are expected to decline in CY 2012 to 28,000 MT due to an increase in domestic production, strong domestic demand and higher domestic prices and fewer domestic products destined for export. Post forecasts cheese imports to increase to 29,000 MT in 2013, considering strong demand from the food service sector. Argentina and Uruguay remain the main suppliers of cheese to Brazil. Stocks: There are no official government stocks of cheese in Brazil. Page 7 Production, Supply and Demand Data Statistics: PSD: Dairy, Cheese (HTS: 0406) Da iry, Cheese B 2011 2012 2013 razil Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Market Year Begin: Jan 2013 USDA New USDA New USDA New Official Post Official Post Official Post Beginning Stocks 0 0 0 0 0 (1000 MT) Production 675 679 700 700 722 (1000 MT) Other Imports 29 39 25 28 29 (1000 MT) Total Imports 29 39 25 28 29 (1000 MT) Total Supply 704 718 725 728 751 (1000 MT) Other Exports 3 3 4 3 3 (1000 MT) Total Exports 3 3 4 3 3 (1000 MT) Human Dom. Consumption 701 715 721 741 758 (1000 MT) Other Use, Losses 0 0 0 0 0 (1000 MT) Total Dom. Consumption 701 715 721 725 748 (1000 MT) Total Use 704 718 725 728 751 (1000 MT) Ending Stocks 0 0 0 0 0 (1000 MT) Total Distribution 704 718 725 728 751 (1000 MT) CY Imp. from U.S. 0 0 0 0 0 (1000 MT) CY. Exp. to U.S. 0 0 0 0 0 (1000 MT) TS=TD 0 0.0 0.0 Page 8 Commodities: Dairy, Butter Production: Note: There are no official statistics on production and consumption of butter in Brazil. Post production estimate for butter is based on trade sources, and also includes “informal” butter production. Butter production is projected to increase by nearly two percent in 2013, reflecting an increase in domestic demand, despite strong competition from margarine. Prices Average wholesale prices of butter manufactured in Brazil are: Table 5 Type US$/kilogram Salted 13.8 Unsalted 13.8 Notes: (1) Prices for Sao Paulo market, as of 10/01/2012. (2) Average Exchange Rate for Oct 2012: US$ 1.00=R$2.00 Trade: Import and export volumes for this product are insignificant. Brazil mainly produces butter for its own consumption and occasionally depending on the market situation exports low volumes. Stocks: There are no official government stocks of butter in Brazil. Page 9 Production, Supply and Demand Data Statistics: PSD: Dairy, Butter (HTS 0405) Da iry, Butter B 2011 2012 2013 razil Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Market Year Begin: Jan 2013 USDA New USDA New USDA New Official Post Official Post Official Post Beginning Stocks 0 0 0 0 0 (1000 MT) Production 79 81 83 (1000 MT) Other Imports 0 1 1 (1000 MT) Total Imports 0 0 1 0 1 (1000 MT) Total Supply 79 0 82 0 84 (1000 MT) Other Exports 1 2 2 (1000 MT) Total Exports 1 0 2 0 2 (1000 MT) Domestic Consumption 78 80 82 (1000 MT) Total Use 79 0 82 0 84 (1000 MT) Ending Stocks 0 0 0 (1000 MT) Total Distribution 79 0 82 0 84 (1000 MT) CY Imp. from U.S. 0 0 0 (1000 MT) CY. Exp. to U.S. 0 0 0 (1000 MT) TS=TD 0 0 0 Page 10 Commodities: Dairy, Dry Whole Milk Powder Production: Note: There are no official statistics on production and consumption of powdered milk in Brazil. OAA estimates for powdered milk production (nonfat and whole milk) are based on trade sources. Post forecasts whole milk powder (WMP) production to increase by three percent in 2013 and reach 549,000 MT. Strong domestic demand and imports limited by quotas from Argentina are factors that explain this increase. Another factor which affects this situation is the food processing industry, which continues to grow and increase its utilization of milk powders. Consumption: Post forecasts WMP consumption to increase by three percent in 2013, due to strong domestic demand. Trade: Milk powder imports, mostly from Uruguay, increased 50 percent during Jan-Aug 2012, compared to the same period in 2011. In 2011, the Brazilian Government (GOB) took measures to prevent higher dairy imports from Argentina. The measures included the non-automatic licensing procedure for imports from Argentina and the establishment of import quotas. The GOB limited Argentine milk powder imports to 3,600 tons per month. The GOB reported that it is likely to implement the same measure against Uruguay. Trade analysts attribute this action to the domestic consumption increase. For this reason Post predicts that WMP powder imports will decrease to seven percent in 2012. For 2013, according to trade sources, imports will return and increase by 3.5 percent. WMP surpluses are occasionally exported to African and Central American markets depending on availability of the product and international market prices. Brazilian milk powders are not competitive in the world market. The United States continues to be competitive with other dairy categories, such as ingredients which Brazil does not manufacture. Sweet whey powder imports from U.S totaled 12 percent and lactose imports totaled 69 percent in 2011. The other category in which United States is competitive is whey protein concentrates and isolate, which account for 62 percent of this market. The volume of dairy proteins is expected to increase as the food industry segment continues growing supporting and demand for this type of ingredient. This is especially the case for the nutritional and health food segment that uses whey protein concentrates and isolates in several different categories of product. Stocks: Page 11 There are no official government stocks of WMP in Brazil. Production, Supply and Demand Data Statistics: PSD: Dairy, Dry Whole Milk Powder Dairy, Dry Whole Milk Powder B 2011 2012 2013 razil Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: Jan 2011 2012 2013 USDA New USDA New USDA New Official Post Official Post Official Post Beginning Stocks 0 0 0 0 0 (1000 MT) Production 510 515 550 531 549 (1000 MT) Other Imports 58 55 50 56 57 (1000 MT) Total Imports 58 55 50 56 57 (1000 MT) Total Supply 568 570 600 587 606 (1000 MT) Other Exports 2 1 3 2 3 (1000 MT) Total Exports 2 1 3 2 3 (1000 MT) Human Dom. Consumption 566 569 597 585 604 (1000 MT) Other Use, Losses 0 0 0 0 0 (1000 MT) Total Dom. Consumption 566 569 597 585 604 (1000 MT) Total Use 568 570 600 587 607 (1000 MT) Ending Stocks 0 0 0 0 0 (1000 MT) Total Distribution 568 570 600 587 607 (1000 MT) CY Imp. from U.S. 0 0 0 0 0 (1000 MT) CY. Exp. to U.S. 0 0 0 0 0 (1000 MT) TS=TD 0 0 1 Page 12 Commodities: Dairy, Milk, Nonfat Dry Production: Post forecasts non fat dry milk powder (NFDM) production to increase by three percent in 2013. The production increase is estimated at seven percent in 2012, as reported previously. The same factors that will increase the WMP production will support production growth of NFDM. In 2011, Brazil produced around 141,000 MT of NFDM. Consumption: Post forecasts NFDM consumption to increase by three percent in 2013, due to strong domestic demand. Trade: Brazil does not export NFDM. Stocks: There are no official government stocks of NFDM in Brazil. Page 13 Production, Supply and Demand Data Statistics: PSD: Dairy, Non Fat Dry Milk Powder Da iry, Milk, Nonfat Dry B 2011 2012 2013 razil Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: Jan 2011 2012 2013 USDA New USDA New USDA New Official Post Official Post Official Post Beginning Stocks 0 0 0 0 0 (1000 MT) Production 135 132 141 141 146 (1000 MT) Other Imports 25 31 22 29 30 (1000 MT) Total Imports 25 31 22 29 30 (1000 MT) Total Supply 160 163 163 170 176 (1000 MT) Other Exports 0 0 0 0 0 (1000 MT) Total Exports 0 0 0 0 0 (1000 MT) Human Dom. Consumption 160 163 163 170 176 (1000 MT) Other Use, Losses 0 0 0 0 0 (1000 MT) Total Dom. Consumption 160 163 163 170 176 (1000 MT) Total Use 160 163 163 170 176 (1000 MT) Ending Stocks 0 0 0 0 0 (1000 MT) Total Distribution 160 163 163 170 176 (1000 MT) CY Imp. from U.S. 0 0 0 0 (1000 MT) CY. Exp. to U.S. 0 0 0 0 (1000 MT) TS=TD -0 0 0 Page 14
Posted: 09 November 2012

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