Uruguay's dairy industry has overtaken Argentina as the main supplier of milk to Brazil, according to Globo Rural, a Brazilian site which specializes in farming news. Brazil's imports were globally 60% Argentine milk and the rest, 40% from Uruguay, but now Uruguay has moved to over 50%, meaning Argentina is losing ground in Latam largest economy and leading Mercosur partner, Anibal Schaller manager of the Milk Industry Center, admitted to Globo Rural.
We would like to have Brazil purchase more milk from Argentina, but what we are seeing is that Uruguay is rapidly moving into the spaces left open by Argentine exporters added Schaller.
The fall in Argentine milk exports to Brazil comes in the framework of industry to industry bilateral negotiations regarding export quotas, which currently stand at 3.600 tons per month but which Brazilian farmers want to reduce and their Argentine counterparts, increase.
If the 3.600 tons per month would have stood, in the first quarter Argentina would have shipped 10.800 tons to Brazil, but the real volume was 5.135 tons, less than half the amount allowed which works out at 1.711 tons per month.
The agreement to continue with the 3.600 tons quota was extended last week in Brasilia in coincidence with the bilateral discussions regarding the auto and auto-parts industries, with full ministerial delegations, which are scheduled to continue this week.
Argentine negotiators wanted to increase the quota to 4.500 tons per month, but we argued it was senseless if they can't even comply with the current volume, explained the representative from Brazil's Agriculture and Livestock Confederation.
Brazil wanted the quota down to 3.000 tons, but it was finally agreed to extend the current 3.600 tons.
To explain the fall in dairy exports to Brazil, Argentine industry pointed to the ongoing bureaucratic impediments to foreign trade and better prices in other markets; while Brazil is prepared to pay between 4.300 and 4.800 dollars the ton, Venezuela, Algeria and China have no problem in paying from 5.000 to 5.200 dollars per ton.
In Brazil three reasons were given to push for a reduction of the Argentine quota: during the first quarter Argentina did not comply with even half the volume established; Brazilian production is estimated to expand at least 10%, and last but not least, ministry and industry sources are not sure that the increase in production will find a similar increase in domestic demand.