In the 24th edition of the digital newsletter for the dairy sector, we can access the update in the month of APRIL 2019 the calculation of Reference values of the liter of raw milk developed under the convention INTA-IAPUCo, a work that constitutes a contribution unreleased and featured to generate transparency for the stakeholders of the Dairy Chain. All values presented here were adjusted for inflation rate wholesale using the IPIM (Index of Wholesale Prices Internal) of the INDEC becoming the current prices published by IAPUCo in constant prices of April 2019. This helps for a better understanding of the factors operating in the market.
We present the graph that summarizes the dynamics of the supply and demand of the dairy market argentino in the past 30 months. Remember that this information should not be taken as a data point accurate given that it arises from more than 500 models evaluated, and presents a large scatter. It is rather a novel tool for actors in the sector to be ORIENTED to interpret what happens between the supply and demand of milk and observe the TREND that the market holds.
The analysis starts in November of 2016. Up to march 2017 is a sample of the period lose-lose that covered the 19 months prior to the start of this convention where the price paid for the raw material (blue line) was not covered by the values that are needed to cover the costs of production of the raw material (dotted line) and exceeded also the possible values of pay for the milk (red line for the Mega and Large-scale Industry and yellow to the Small and Medium-sized dairies). From April 2017 until September 2017, the system generated net positive. But as of January 2018 the costs of producing milk copied the evolution of inflation while the price received by the producer as well as the reference values in industrial lost purchasing power of accumulating negative balances up to march 2019, a month, from which, and after 16 months, the chain began to accumulate positive balance.
For April 2019 the price the producer called the purchasing power of April 2014 the year prior to the crisis, marking a significant recovery (+23% in constant currency so far this year), allowing to overcome the costs of production of the models which was not the case since August, 2017. This recovery price in a good part arises from the increase in the participation on the final values of the dairy, reaching for April, almost 35% of the mix, the Total System.
For the industrial side, Smes are showed in purchasing power higher than that of large-scale Industry (+9%) for the third consecutive month thanks to the update of the price of the cheese. Since September 2018 the big industry are paying in excess of their capacity at the expense of costs imputed (not provided), fighting between the idleness (last data MINAGRI brand that is receiving 39% of the installed capacity) and the need to move toward a payment system that encourages the production of solids in order to improve the efficiency of their production process.
The values retained net (VRN) for the Dairy Chain were positive for the second time since September 2017, thanks to the marked improvement obtained by the link primary production.
Without a doubt, the poor production, the product of many months of work loss, combined with increased exports and increased competition from February 2019 with the taking of possession by AdecoAgro of plants -former Sancor - Mortar and Chivilcoy, for reheat the market for the sale and purchase of raw material, generating for the first time in a long time, improvements in the price tambero with substantial increases in their purchasing power.
Keep this level of fit and putting the value of the raw material up 30 cents US$/litre of milk, you can expect a recovery of the production, reversing the negative trend in year-on-year observed in the first quarter of 2019. The competition for raw materials continues to evolve and to all the sector of the demand is pushing for the drums, including Mastellone that after letting go of a significant amount of milk left in active search.
