Brazil's Dairy Sector Seeks a Comeback

Brazil's Dairy Sector Seeks a Comeback

The South American country hits a pothole on the road to becoming a challenger to U.S. dairy exports.

In 2008, Brazil looked well on its way to becoming a significant player on the world dairy market. Export volumes had more than doubled over a two-year stretch to 1.1 million tons. The country posted a record dairy trade surplus (more than 630,000 tons) when only six years earlier it had run a 1-million-ton deficit.

The Innovation Center for U.S. Dairy in its 2009 Global­ization Report called out Brazil as one of a handful of emerging nations that could eventually become dairy export players and provide low-priced competition to the United States.

But for the past two years, rather than move forward, the country's dairy sector has taken a couple steps back, the U.S. Dairy Export Council reports in its July "Export Profile" newsletter.

Poor weather, low farm gate prices and high input costs in 2009 and 2010 hindered milk production.

USDEC reports that rising do­mestic consumption reduced the country's exportable surplus. Steady gains in the Brazilian real vs. the U.S. dollar and Argentine peso hindered export competitive­ness. And quality problems and inefficiency plague the industry. Per-cow productivity has historically been less than one-third the U.S. average.

"The lack of infrastructure in a country of Brazil's proportions results in inequality of production: There are islands of excel­lence with high-tech farms producing exceptional quality milk, but the majority are small producers with herds of less than 25 cows with inconsistent quality records," says Sonia Amadeo, USDEC's South American office representative. "Milk quality affects exports: Brazil can ship mostly to Africa, and to importers that do not have strict parameters for somatic cell count and other quality requirements."

Consolidation and investment were supposed to help but have so far fallen short of expectations.

Still, the experts say Brazil has the potential to be a formidable player on the world dairy market. It just might take longer to get there than originally imagined.

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