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Dairy farmers expect prices to stabilize at least this year

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Dairy farmers expect prices to stabilize at least this year

Milk is one of the products that Colombians consume the most every day; however, some families have had to do without it or lower their rations due to the high prices. This food, together with meat and eggs, maintains an upward trend that makes the family basket more expensive.

THE NEW CENTURY spoke with Felipe Pinilla, president of Analacon the increase in production costs, the affectation by rains and consumer prices.

THE NEW CENTURY: When would milk prices drop?

FELIPE PINILLA: I hope that prices at least stabilize, that is, that they stop their upward trend. It should be remembered that in July, August and September costs fell, but in October, due to the rains, the dairy sector was again affected.

It is difficult to determine an exact date when prices will fall, but we hope that during 2023 there will be a time when this rising cost trend stops. It may remain at very high levels, but at least it will not continue to grow.

ENS: Why have the prices of the dairy sector been affected?

FP: In general, for more than two years the agricultural sector has suffered a rise in the cost of production due to factors such as the weather, closely linked to winter; fertilizers at very high prices, as well as the most expensive concentrates for animals.

In these two years, production costs have undoubtedly increased. The milk producer has become 15% more expensive in 2021 and it became 39% more expensive to produce a liter of milk in 2022, gigantic figures if we compare them with those of previous years, which were between 1% and 2%.

This has happened not only in Colombia, but in the global markets for these products, which somewhat explains the reason for the high costs.

External factors

Other aggravating factors must also be taken into account, such as, for example, the container crisis, as well as bringing supplies from abroad that have become up to five times more expensive; In addition, fertilizers and grains became more expensive. We cannot forget the Russian-Ukrainian war, this has also increased costs.

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What this increase does is push costs up; however, the price that was paid to the producer was not. Dairy farmers began to be forced to lower their production, not by their own decision, but because there were not enough resources for inputs and that immediately translates into an impact on production.

Let us remember that in the second half of 2021 it began to be difficult to find milk for the industries, at that moment the growth of producer prices began, which was carried over throughout 2022. This helped, in some way, to cover red balances for the year 2021 and in this way the year 2022 was more profitable for dairy farmers.

Some have said that prices have gone up and that because of that someone in the chain, be it the producer or the manufacturer, won the lottery and became a millionaire overnight. But it is not, it is not like that, because, just as the prices paid to the milkman have grown, at the same time high production costs are paid.


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The rains

ENS How have the rains affected the industry?

FP: In this sense, there is definitely a factor that currently does not help the sector much and that is that we have gone through cycles of between four and five months of floods and rains in different regions of the country. There have not been cases of emergencies, but with a lot of water, and although production continued, this affects it. This year, for example, the first 15 days of January we also had heavy rains, especially in Boyacá and Nariño.

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It should be mentioned that Nariño is greatly affected by the collapse of the Pan-American highway and in the case of Cauca and Boyacá with several floods. The weather hasn’t helped, because that limits production.

However, it must be mentioned What is positive news is that it seems that fertilizers have had a downward trend that has been sustained. There is no longer such variable behavior.

ENS: What has been the impact on the sector with the collapse of the Pan-American Highway?

FP: Like potatoes, milk is another of those great Nariño flagship products. Of the 26 departments that have milk production records, Nariño is the fourth region. The department produces around 850,000 liters, of which more than 50% is raw milk that is purchased from the producer and taken out in tank trucks to Cauca and Valle del Cauca; At that point, the milk is very vulnerable because it is perishable, that is, if it is not removed quickly to pasteurize it, to turn it into cheese, yogurt or butter, it is damaged. This is the concern of producers in the region, since the capacity to store refrigerated milk on a farm is very low.

Another aggravating factor is that the fertilizers, as well as the concentrates from the cows, all come from outside of Nariño, which means that today, buying a package of concentrate or a fertilizer is much more expensive than it was 15 days ago. before the collapse.

Although there are some alternatives, the possible routes are very fragile in terms of cargo transportation, so such heavy vehicles cannot pass, which makes transportation more expensive and impacts the cost of the entire production chain.

Invías, for his part, has said that in less than a month there would be the first partial solution, but for the road to return to what it was before the collapse it would take between three and four months, taking into account the seriousness of what happened .

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The results

ENS: What are the figures for the sector at the end of 2022?

FP: Although there are no figures yet for December, it is most likely that production has fallen. It is important to take into account that of all this production there is a part of which we were not able to capture information. For example, there are some local and informal sales for which we do not have information on how and when it is marketed. This can represent half of that production. The other half is the production that is bought and processed by the big dairy brands.

In terms of prices, the cost of production in 2022 increased by 39% and the cut price to November grew by close to 34%. In other words, the price paid to the producer and the costs assumed by dairy farmers for inputs practically grow at the same magnitude.

Imports and exports

FP: You have to wait between one and two months to find out official figures, but we are anticipating that imports will be higher than in 2021, taking into account that in October last year 107% of what was imported in all of 2021 had already been imported. .

In external purchases, we can speak of about 7% of the country’s total production

As for exports in 2022, we are going to close with lower figures than the previous year. In the same way, our external sales have always been very low. There is no export door for the dairy sector; this is a pending task for the entire chain.

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