There are two indicators with strong influence in the determination of the price for the raw material for the processing industry: the level of inventory and the receipt of milk.
The stocks have a correlation with the price to pay for the following month. The drivers of stock are multivariate (level of domestic consumption, price of goods in the international market, exchange rate, tax burden, price controls, and the perception of the entrepreneur of the current scenario and future of these factors and the intrinsic of each company...for some actors to stay with stock represents a "nail" and for other speculation).
We observed an increase of stock, mostly cheese (59%) and milk powder (34%), in a scenario with strong recovery in exports of dairy products (thanks to the elimination of export duties and sinceramiento the type of change) and significant decline of the production of milk (real and projected for January 2024):
Obviously, the domestic consumption falls with the crisis, inflation, and only the strength of the export industry for some and the lack of milk for all will put pressure on the price of milk to the producer who urgently need to recover the historical relationship with the maize (2:1), which currently represent 310 $/lt of milk.
In the next chart, we look at the values of milk paid to the producer (constant pesos as of January 2024 estimating 20% inflation for January/liter) for different levels of stock in the previous month. Depending on the stock of dairy December 2023 then we should see to January 2024 at a price SIGLeA near 270 $/lt (+40%) value still falls short with respect to the costs of milk production. The impact of the fall of the receipt of milk is obscured due to the fall in domestic consumption.
The dairy chain comes at a loss in the last 24 months, but the tambero, with 98% of the losses, it is the one that charges the most:
...and seeing the evolution of these values retained by link is observed improvement by the industry in the past few months, while the producer is sinking, setting a record in the series, each time more in a tangle of debts and settlement of cows that cast shadows on the possibilities of the sector.
[twitter-follow screen_name=’dairylando’]