Brazilian dairy sector has three reasons to be optimistic for 2020.
The reasons to be optimistic include a forecast of 2,25% gross national product (GNP) growth this year, the expected increase in exports of powdered milk and cheese to China and better price levels since the beginning of the year.
Historically, the internal market consumes almost the entire national production, but due to better economic results, this should drive more demand. The new range of prices at the end of 2019 might provide an earning for farmers for the entire year.
Furthermore, the supply of milk in the Brazilian market is likely to remain limited in 2020, especially in the first quarter, which can reinforce this trend of high prices.
According to researchers from Cepea (Center for Advanced Studies in Applied Economics), from Esalq / USP, corn and soybean meal costs have been increasing in the Brazilian market.
The entire livestock sector’s demand for grain may raise this year, resulting in higher prices. In addition, the high dollar rates will push corn and soy producers to commercialise with foreign market.
Cepea says this scenario can damage the exchange ratio for cattle farmers, especially in the first semester. This shows that, despite better prices, production faces structural bottlenecks.
“The main issue for the farmer is making long-term investments in the face of uncertainties in the short term, which includes volatile prices. These, in turn, depend on a delicate balance between supply in the field and consumption of dairy products,” describes Cepea’s monthly report.