Executive Summary

Argentine milk production figures provided by the Argentina Ministry of Agriculture were recently updated with values spanning through the first three quarters of the ’17-’18 production season. Highlights from the updated report include:

• Argentine milk production has increased on a YOY basis throughout seven consecutive months through May ’18. ’17-’18 annual Argentine milk production finished 3.1% higher YOY, rebounding from the seven year low levels experienced throughout the previous production season.
• Low farmgate milk prices, poor weather, high inflation and increased production costs contributed to the Argentine dairy cow herd declining to a long-term record low level throughout 2017. USDA projects the Argentine dairy cow herd will increase slightly throughout 2018, rebounding 0.7% YOY from the 2017 lows.
• Argentina is the fifth largest global dairy exporter, accounting for 2.3% of combined butter, cheese, nonfat dry milk and whole milk powder exports throughout 2017. The bulk of Argentine dairy exports are in the form of whole milk powder and cheese.

Additional Report Details

According to the Argentina Ministry of Agriculture, May ’18 Argentine milk production increased on a YOY basis for the seventh consecutive month, finishing up 2.1% to a three year seasonal high for the month of May. Overall, ’17-’18 annual Argentine milk production finished 3.1% higher YOY, rebounding from the seven year low levels experienced throughout the previous production season.

Argentine milk production declined 10.1% YOY throughout the ’16-’17 production season as low farmgate milk prices, poor weather, high inflation and increased production costs took a toll on producers. Floods generated by a strong El Niño affected major milk producing areas, forcing dairy producers to use supplemental feed sources within rations as pastures remained under water. After periods of excessive flooding experienced during 2016 and early 2017, weather conditions are expected to improve throughout 2018. Consolidation within the Argentine dairy sector due to recently experienced weather damage and low margins has streamlined costs and ensured greater efficiencies, resulting in a stronger production environment. USDA is projecting a 6.0% YOY increase in Argentine milk production throughout the 2018 calendar year, aided by improved weather conditions, higher farmgate milk prices and ongoing structural changes. Argentine milk production is up 7.9% throughout the first five months of 2018.

Recently experienced adverse conditions contributed to the Argentine dairy cow herd declining to a long-term record low level throughout 2017, finishing lower for the fifth consecutive year. USDA is projecting the Argentine dairy cow herd to increase slightly throughout 2018, rebounding 0.7% YOY from the 2017 lows.

Argentina is the second largest milk producing country in South America, trailing only Brazil, and the fifth largest global dairy exporter, trailing only New Zealand, the EU-28, the U.S. and Australia. Of the aforementioned major dairy exporting regions, Argentina accounts for 3.5% of total combined milk production and 2.3% of combined butter, cheese, nonfat dry milk (NFDM) and whole milk powder (WMP) export volumes.

The bulk of Argentine dairy exports are in the form of WMP and cheese. Argentina was the third largest exporter of WMP throughout 2017, trailing only New Zealand and the EU-28, accounting for 3.7% of global WMP export volumes. From a global perspective, WMP markets may be most affected by a continued rebound in Argentine milk production.