What will be Brazil's role in the dairy market in the coming years?
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Transcript of What will be Brazil's role in the dairy market in the coming years?
9 de abril de 2023
Marcelo Pereira de CarvalhoCEO - AgriPoint
What will be the role of Brazil in the coming years?
AgriPoint
A company in the information business for agricultural sectors, with dairying being the main area.
Our services/products for the dairy sector
Forecasts/Previsões
Forecasts/Previsões
In 2020, Brazil would be exporting between 1,7 and 6,0 billion liters/year...
It’s not east to make forecasts...
• The time frame they are done affect our perceptions and therefore the results
• Many different and uncontrollable variables
• We live in a moment of significant changes
In 14 years, nearly 50 kg more per person...
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013100
110
120
130
140
150
160
170
180
122 120
127125
128132
136 136141
153
160
168 168171
Per capita milk consumption (milk-equivalent/year)
Source: MilkPoint
Add to that 28 million more people consuming!
Total market: +62% or +13 billion liters
Market growth dynamics
Mercado to
tal
Inspecio
nado
População
Per capita
Produçã
o0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
3.12%
2.26%
1.64%1.46%
3.18%3.13%
5.56%
1.34%
1.76%
4.27%
4.42%
5.08%
1.01%
3.38%
4.02%
1989-2000
2001-2006
2007-2013
Source: MilkPoint
Production growth
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
2012
7,500
10,000
12,500
15,000
17,500
20,000
22,500
25,000
27,500
30,000
32,500
35,000
Fonte: IBGE / Elaboração: MilkPoint
Milh
ões
de
litro
s 4,1%
3,2%
How much of our consumption is produced internally
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201388%
90%
92%
94%
96%
98%
100%
102%
104%
Self-sufficiency Index (production/consumption)
Source: MilkPoint
Can Brazil be considered a structural importer?
Brazil x world milk price
Source: MilkPoint, based on gDT and Cepea values
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Equiv. LF importado (R$/l) Média CEPEA BR
R$/l
itro
• Trade policy: 27% tax for WMP distort the market – will it be kept?
• No clear trend regarding being either a large importer or a large exporter
• Exchange rates and world prices impact this status
Brazil’s role regarding dairy trade
• Consumption will growth less in the future• Production will also growth less in the next
years
What can we expect?
But important changes are happening
Dynamics after 2007
1/19909/19915/19931/19959/19965/19981/20009/20015/20031/20059/20065/20081/20109/20115/201300
50
100
150
200
250
300
350
400
450
Food Price IndexMeat Price IndexDairy Price IndexCereals Price IndexOils Price IndexSugar Price Index
Source: FAO
Land values rising – Brazilian example (R$/ha)
Source: FNP/Estado de S. Paulo (2013)
2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
2000
4000
6000
8000
10000
12000
14000
16000
NORTH; 2.089
NORTHEAST; 3.112
MIDWEST; 5.748
SOUTH; 14.117
SOUTHEAST; 11.714
BRAZIL; 6.995
R$/H
A
+70%
Land opportunity costs – Brazilian example on sugarcane areas
• OPPORTUNITY COSTS – SÃO PAULO STATE
• -2003 - U$ 180,00/ha = equal to a profit of R$ 0,09/L, considering 3.500/kg/ha/year.
-2010 - U$ 625,00/ha = R$ 0,10/L, considering 10.000/kg/ha/year.
This effect puts pressure on dairy productivity
Source: Roberto Jank Jr. – Interleite (2011)
Fonte: Cepea/USP e IBGE (2013)
Minimum wage and milk prices (1991 = 100)
779
393
Valores nominais
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
100
200
300
400
500
600
700
800
900
1000
Minimum Wage Milk Price
410
889
Growing interest on robot milking
Survey on number/profile of dairy producers
• 48 dairy companies
• June/July 2013
• 17,5 million liters/day
• 30% of inspected production
Survey on number/profile of dairy producers
Considering total inspected production
Number of Producers Volume
Ranges liters/day Number % Liters/day %
Up to 250 168.463 67% 14.062.050 23%
250-500 46.637 19% 12.679.935 21%
500-1000 22.668 9,0% 12.432.707 20%
1000-3000 10.821 4,3% 13.668.693 22%
More than 3000 2.194 0,9% 8.357.996 14%
Total 250.782 100% 61.201.381 100%
Average: 249 kg/day
Official data 2005/2006 x our survey
2005/2006 MilkPoint/Leite Brasil 20130
100000200000300000400000500000600000700000800000900000
1000000
Producers selling the milk x our survey
Official data 2005/2006 x our survey
2005/2006 MilkPoint/Leite Brasil 20130
100000200000300000400000500000600000700000800000900000
1000000
Producers selling the milk x our survey
Every 6 minutes a producer left the
business!
• Population income raised and unemployment rate fell steadily to less that 5% higher consumption but also labor and sucession challenges in farms
• Higher land opportunity costs improve productivity or leave
• Investments in processing capacity aiming domestic market and exports
• Import tax shielded (to some extent) Brazilian market to what was happening in the world artificially high internal prices
• But production lagged behind consumption market were tight and industries were pressured
Dynamics after 2007
Jan.04Jul.0
4Jan.05
Jul.05Jan.06
Jul.06Jan.07
Jul.07Jan.08
Jul.08Jan.09
Jul.09Jan.10
Jul.10Jan.11
Jul.11Jan.12
Jul.12Jan.13
Jul.13
0.500
0.600
0.700
0.800
0.900
1.000
1.100
1.200
1.300
Real increase in milk prices
Source: MilkPoint/Cepea (2013)
R$/liter (inflation-corrected)
• Averages hide a big range in prices received by dairy farmers
• Within the same region, there may be producers getting R$ 0,80/liter up to R$ 1,30/liter
– Volume– Quality– Influence, etc
• Are they in the same business?
• Efficient large farmers do have a good business!
Dynamics after 2007
Top 100 grew nearly 10% in 2013
New investments going on – Southeast Brazil
New investments going on – Midwest Brazil
New investments going on – Northeast Brazil
Progressive producers – South Brazil
Midwest Brazil
South Brazil
Small producers with family labour also growing
Small producers with family labour also growing
•How long it will last for?
But...
Real retail prices for a mix of dairy products1.
9.06
1.11
.06
1.1.
071.
3.07
1.5.
071.
7.07
1.9.
071.
11.0
71.
1.08
1.3.
081.
5.08
1.7.
081.
9.08
1.11
.08
1.1.
091.
3.09
1.5.
091.
7.09
1.9.
091.
11.0
91.
1.10
1.3.
101.
5.10
1.7.
101.
9.10
1.11
.10
1.1.
111.
3.11
1.5.
111.
7.11
1.9.
111.
11.1
11.
1.12
1.3.
121.
5.12
1.7.
121.
9.12
1.11
.12
1.1.
131.
3.13
1.5.
131.
7.13
1.9.
131.
11.1
3
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Composto Varejo Composto Indústria ProdutorFonte: CEPEA, MilkPoint; Elaboração: MilkPoint
R$/liter – inflation corrected
Industry lost margin to producers and retailers
2008 2009 2010 2011 2012 20130.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
0.93
0.86 0.86
0.95 0.94
1.04
0.76 0.78 0.77
0.670.62
0.710.61
0.640.59
0.64
0.71
0.75
% Produtor
% Indústria
% Varejo
Fonte: CEPEA e MilkPoint (2013)
Inflation-corrected values for a mix of UHT, pasteurized, powder milk and cheese
Some relevant processors facing problems
Solvency problems
Coop sold 50% to Vigor - JBS
Board authorized to sell dairy assets
New players studying Brazil, but only a minor deal ocurred
What to expect?
• Large price ranges will continue• This, coupled with opportunity costs, will lead to a
structural change in production• Many will leave the business, but production will keep
growing• How many will be producing milk in 10 years? Good
question!• Production will grow less – 2-3% in average, compared
to >4% from 2007-2013• Brazil will still be an opportunistic exporter and a minor
importer, unless...• Import taxes are removed (if so, the change will be more
dramatic and faster!)
What to expect?
Farming trends
Consolidation Technology adoption Higher productivity Automation Irrigation Integration with agriculture Investments Improved services Management/information “sharemilking” systems?
Labour challenges Management challenges Environment/manure mngt. High costs/volatility Animal welfare/milk quality
But...there are broader challenges:
Policies Exporting agenda Dairy chain coordination
Gracias – Obrigado – Thank you!
Marcelo P. Carvalho19 [email protected]