Quarterly Argentina Milk Production Update – Mar ’20
Executive Summary
Argentine milk production figures provided by the Argentina Ministry of Agriculture were recently updated with values spanning through the end of the first three quarters of the ’19-’20 production season. Highlights from the updated report include:
Argentine milk production volumes declined 5.8% on a YOY basis throughout the first half of the 2019 calendar year largely due to abnormally warm and humid weather conditions. Argentine milk production volumes rebounded by 1.7% YOY throughout the second half of the calendar year, however, as lower feed costs, greater industry efficiency and a recovery in prices continue to offset rising inflation rates. A significant devaluation in the Argentine peso has resulted in increased operating costs, particularly for producers that purchase inputs priced in U.S. dollars and collect their milk checks in Argentine pesos. Financing has become increasing limited as the Argentine government was forced to raise interest rates by over 70% in order to mitigate the currency devaluation.
2019 annual Argentine milk production volumes declined 1.8% on a YOY basis but remained 0.4% above three year average figures. USDA is projecting Argentine milk production will rebound by 1.5% on a YOY basis throughout the 2020 calendar year as a positive margin environment, coupled with a return to average temperatures, is expected to incentivize production expansion. USDA noted rising costs of production including labor and utilities may begin to erode margins throughout 2020, however.
Recently experienced adverse conditions contributed to the Argentine dairy cow herd declining to a long-term record low level throughout 2019, finishing lower for the seventh consecutive year. USDA is projecting the Argentine dairy cow herd will rebound by 1.4% throughout 2020, however. Recent declines in the Argentine dairy cow herd resulted in a consolidation of operations along with a culling of the lowest producing cows.
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 accounted for 3.6% of total combined milk production and 2.8% of combined butter, cheese, nonfat dry milk (NFDM) and whole milk powder (WMP) export volumes throughout 2019.
The bulk of Argentine dairy exports are in the form of WMP and cheese. Argentina was the third largest exporter of WMP throughout 2019, trailing only New Zealand and the EU-28, accounting for 4.7% of global WMP export volumes. From a global perspective, WMP markets may be most affected by a continued rebound in Argentine milk production.
- Argentine milk production increased on a YOY basis for the eighth consecutive month during Feb ’20, finishing up 11.4% and reaching a four year seasonal high level. 2019 annual Argentine milk production volumes declined 1.8% on a YOY basis however USDA is projecting production will rebound by 1.5% throughout the 2020 calendar year.
- USDA is projecting the Argentine dairy cow herd will increase 1.4% throughout 2020, rebounding from the long-term record low levels experienced throughout 2019.
- Argentina is the fifth largest global dairy exporter, accounting for 2.8% of combined butter, cheese, nonfat dry milk and whole milk powder exports throughout 2019. The bulk of Argentine dairy exports are in the form of whole milk powder and cheese.
Argentine milk production volumes declined 5.8% on a YOY basis throughout the first half of the 2019 calendar year largely due to abnormally warm and humid weather conditions. Argentine milk production volumes rebounded by 1.7% YOY throughout the second half of the calendar year, however, as lower feed costs, greater industry efficiency and a recovery in prices continue to offset rising inflation rates. A significant devaluation in the Argentine peso has resulted in increased operating costs, particularly for producers that purchase inputs priced in U.S. dollars and collect their milk checks in Argentine pesos. Financing has become increasing limited as the Argentine government was forced to raise interest rates by over 70% in order to mitigate the currency devaluation.
2019 annual Argentine milk production volumes declined 1.8% on a YOY basis but remained 0.4% above three year average figures. USDA is projecting Argentine milk production will rebound by 1.5% on a YOY basis throughout the 2020 calendar year as a positive margin environment, coupled with a return to average temperatures, is expected to incentivize production expansion. USDA noted rising costs of production including labor and utilities may begin to erode margins throughout 2020, however.
Recently experienced adverse conditions contributed to the Argentine dairy cow herd declining to a long-term record low level throughout 2019, finishing lower for the seventh consecutive year. USDA is projecting the Argentine dairy cow herd will rebound by 1.4% throughout 2020, however. Recent declines in the Argentine dairy cow herd resulted in a consolidation of operations along with a culling of the lowest producing cows.
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 accounted for 3.6% of total combined milk production and 2.8% of combined butter, cheese, nonfat dry milk (NFDM) and whole milk powder (WMP) export volumes throughout 2019.
The bulk of Argentine dairy exports are in the form of WMP and cheese. Argentina was the third largest exporter of WMP throughout 2019, trailing only New Zealand and the EU-28, accounting for 4.7% of global WMP export volumes. From a global perspective, WMP markets may be most affected by a continued rebound in Argentine milk production.