The Uruguayan dairy industry

Uruguay has a well established, growing and export focused milk processing industry. It supplied 1,576 million litres in the fiscal year 2006/2007, having supplied on average for the last seven years around 1,445 million litres per year (of which around 1,328 million litres are processed industrially), compared with around 15,770 thousand metric tons in New Zealand for 2007 (estimated by Fapri in the 2008 Agricultural Outlook).

Dairy farms are individually licensed by the Uruguayan Ministry of Agriculture and Fisheries (MGAP) for the control of critical hygiene factors (water supply, employee medical certificates, condition of buildings and installations) plus annual control for brucellosis, tuberculosis and mastitis.

The environmental government agency, DINAMA, runs programmes in conjunction with the industry that have been developed over the last nine years achieving good levels of success. The government provides finance to assist farmers in the adoption of good environmental practices.

Over the ten year period from 1997 total supply has increased at an annual average compound rate of 2.6 percent and over the last two decades at an annual accumulated expansion of 3.6 percent. The decrease in supply in 2000 was due to a drought in the summer of 1999-2000, while the decrease in 2002 was due to movement controls associated with an outbreak of Foot and Mouth Disease (FMD).

Milk processed by the industry in the first half of the year was 7.1% higher than in the same period in 2007, when adverse weather conditions restricted production (high rainfall at the end of summer and during autumn ). In May production had fallen but rainfall at the end of June made production recover in the first days of July.

The value of milk product exports has been growing rapidly at a compound rate of 7,3 percent from 1998 to 2007 rising from US$185 million to US$347 million. In addition there has been a major shift in destination away from Brazil and Argentina which jointly made up 73 percent of exports in 1998 to only 7 percent in 2007. The major market in 2007 was Mexico at 31 percent, which has grown from 5 percent in 1998. Since 2003 exports to Mexico have increased with the introduction of a free trade agreement between the two countries.

 

 

 

Mexico and Venezuela have jointly taken over 40 percent of export dairy products from Uruguay since 2004. With Mexico, the free trade agreement is a major driver, while in Venezuela the financing of food subsidies for domestic social programmes from increased oil revenues has driven demand. Exports to Venezuela are predominantly milk powder, whilst exports to Mexico and Brazil include a wide variety of milk products.

Farmer co-operative Conaprole processes around two thirds of all milk produced in Uruguay and is the largest of six milk processors based in Uruguay. Milk supplied to Conaprole is collected chilled from farms and transported in insulated tankers. Any farmer can become a member of the Conaprole co-operative provided requirements such as hygiene and animal health standards are met. This choice of milk processor ensures that a competitive environment exists for the sale of milk.

In 2007, 63% of Uruguayan dairy products were exported, mainly cheese and milk powder (which accounted for 83% of total dairy exports).

 

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