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Dairy prices on a roller coaster in Brazil due to pandemic

In Brazil the market is suffering with high prices variations paid to farmers, while some plants are shutting in some regions.

Since 17 March, dairy products prices in Brazil has been showing a roller coaster trend due to Covid-19 pandemic. In the first instance a rising trend could be seen, however currently producers are seeing a downward trend, which is expected to get worse up until May.

Photo: Daniel Azevedo
Photo: Daniel Azevedo

Initially consumers stocked different types of food and demand for milk skyrocketed. As consequence, retailer chains experienced intensified demand for products and milk prices increased 22.7% in the second half of March and 24.8% during the entire month.

The situation also had a huge impact on cheese producers, while milk prices grew, the average price of mozzarella, for example, dropped 0.97% in March. Small and medium-sized business felt this crunch which has led to and some having to stop operating.

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The fragility of the cheese market and the instability of consumption generated a domino effect and it led to a drop in the price of milk at the main markets this month.

The daily Cepea (Center for Advanced Studies in Applied Economics) from Esalq-USP (University of São Paulo) showed that, from April 1 to 15, the average prices for UHT and mozzarella saw decreases of 4% and 4.2%, respectively.

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Payments and milk dumping

A knock-on effect could be seen, which resulted in milk producers not receiving payments in certain regions. Also dumping of milk took place at some farms in Brazil - just as it did in the US, Canada and UK, with thousands of litres of milk being dumped.

Due to the impacts being felt in April, producer prices in May is predicted to remain unfavourable, with Brazil’s dairy producers facing a drop in revenue for in the weeks ahead.