No use crying over powdered milk...?




In a price scenario never seen before in this country, the dairy industry channels its production towards exports, neglecting the domestic market.


Historically, the sector’s best prices were to be had in the milk sold for domestic consumption, but international markets have brought about a substantial change in this relationship, directly impacting dairy industrialization, artisanal cheese production, and the supply of liquid milk to the Uruguayan population.


The traditional competition over the domestic market waged between the country’s dairy companies at the end of the last century is now a thing of the past. Today, with the international price of powdered milk at more than 5 thousand dollars a ton, milk dehydration has turned into the most profitable business in the industry.


Global market outlooks indicate that this trend could continue over the long-term, bringing significant structural changes in both the local and international market. The country’s dairy companies are retrofitting at a very fast pace, among other reasons because the equipment and machinery necessary to manufacture powdered milk are relatively cheap and this process’ profitability and simplicity are not found in other, more complex, industrial manufacturing processes.


Artisanal cheese production changes its course


The competition over milk supply, therefore, has increased significantly in the last six months, primarily in the country’s littoral region, where several plants offer different benefits to attract suppliers. This situation affects Uruguay’s artisanal cheese production, a sector that engages more than 2 thousand family producers. In the area of Colonia Suiza there are companies offering producers 7 pesos per liter of milk, and producers are tempted for two reasons: because there is a huge difference between the production processes involved, and because in order to obtain that value per liter of milk making cheese, you need to turn out a high quality product.


This puts Uruguayan artisanal cheese production at risk, because many producers could abandon cheese production and simply supply all their milk to the various industries, leaving craft production in the hands of only those families who have traditionally produced artisanal cheese.


Who loses?


Small dairy farms, not just because this year’s production is 20 percent less than last year’s due to bad weather conditions, but also because the market pays a differential price to these producers, a price below that paid to large industrial manufacturers, as the price is determined by the amount of milk supplied (what in the market is known as quota milk and industry milk). This is detrimental to small dairy farmers who supply more quota milk than industry milk, and it favors large producers who supply more industry milk.


And the workers of the dairy industry, who are also victims of this situation, as in many places they risk losing their jobs, primarily due to the arrival of various transnational corporations who are only interested in our raw material.


At Ecolat Uruguay S.A (Parmalat), which was acquired some months ago by the Venezuelan Group Maldonado –associated in several countries with the powerful New Zealand company Fonterra-, corporate directors are restructuring production. Their goal is to strengthen powdered milk production, bringing in new technology, retrofitting the drying equipment, seeking to enter markets that they are not accessing today, paying the high cost of cutting production of ultrapasteurized milk in half, reducing cheese production to 60 percent, closing down sweat spread production, eliminating molten cheese production, reducing yogurt and dessert production by more than 50 percent, and cutting butter production, among other measures.


The company argues that market changes are forcing it to take these measures, while at the same time it expresses an interest in reducing the number of workers on the payroll, through different means, such as, for example, incentives for retirement.


While a good spring season is expected, and the sector may possibly reach new production highs, transnational corporations such as Parmalat are seeking to reduce the domestic market, thus risking the population’s milk supply and cutting down the number of jobs. And all of this due to the international price of powdered milk.


In Colonia, Pablo Farías

© Rel-UITA

August 30, 2007






  UITA - Secretaría Regional Latinoamericana - Montevideo - Uruguay

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