1.- Dairy world trade view:

Under the GATT Uruguay Round Agreement, in the next years there will be a important decrease in subsidies for the international milk market. The European Union and the US use export subsidies to move any milk surpluses into the world market at prices that can compete in such markets. This will no longer be possible in the future, so local dairy farmer milk price, in these countries, will depend on their internal consumption. The need of quotas will come up immediately, limiting growth to buying another farmers quota. The only place were there will be no limit to milk production growth shall be were the internal cost of production is similar to external milk prices (15-18 US cents per liter). This can be achieved only in places were a cow can graze all year around like there is in New Zealand, Australia and Argentina. NZ seems to be in the limit of their production capacity (very expensive and limited amount of land to put more cows on). Australia is growing at a 5% rate, but land is more expensive. Argentina has lower land prices and a huge available area compared to it competitors.
You can see this already in the Dairy World Market and Trade figures : In the last 5 years there has been a cow number reduction for the US of 4 % and for the EU of 9%, while Argentina had a 14% increase in the milking cow number.
Actually, Argentina has the biggest milk production growth rate (10%/Year).

2.- The local market:

The MERCOSUR has opened a huge door for local surplus (we actually consume 80 % of the total milk production). The surplus is exported and 60% goes to Brazil at almost the same local prices.
The average milk farmgate price for the last five years was $19.8 / 100 liters (10 $/CWT).
Winter prices are higher (22-23 cent/Lt) and spring/summer a little lower (18-19 cents).
Milk is sold on a standard quality basis and payment is made by milk's protein content.
There are 3 reasons that make people think in Argentina:

3.- Milking systems:

Argentina has a grazing based dairy farming system. There is a mild climate that allows cows to graze yearly around. The wide range of land quality opens the menu of the way to dairy. Dairying in the best land, were you can grow 10 ton corn crops with no irrigation, enables farmers to get more intensive (less grass&water in diet, higher diet concentration, TMR, high milk yield per cow, high DM forrage yields per hectare). As you go down to less quality land, grazing becomes more important.
There are well managed farms (WMF) with similar financial returns (9-18% rent, expressed as porcent of total capital investment) on both type of systems.
On the best land you can grow corn and alfalfa based pastures. On inferior land you can achieve high dry matter yield with perennial rye grass, red & white clover pastures using higher fertilizing rates.
Argentina has around 25.000 dairy farms, and as in the rest of the world, each year there are less, but cow number (all holstein) is growing, making total milk production go up each year (in last five years at a 8.9 %/Year rate). We are producing 8500 million liters per year. Cows in WMF are milking 6000-8000 lts/305 Day Lactaction (13200-17600 Lb). The production is messured in MilkFat/Hectare basis since land is the mayor part of capital investment. WMF milk yield ranges 180-250 Kg MF/Ha, with top figures over 400 Kg MF/Ha. (These figures involve milking and dry cows area, not heifer raising area). A fresh cow milks 30-45 Lts/day. The MF content ranges 3.33-3.6 % and the Protein content ranges 2.9-3.1%.

4.- Dairy equipment, land & cow costs:

Actual prices for...

Go to Home Page

Graphic Design by Pablo Snyder / Copyright © 1997 Snyder Bros. All rights reserved.