Uruguay, a small yet influential country in South America, is known for its high-quality beef, citrus, rice, soybean, wool, and dairy products. The dairy sector is particularly noteworthy, as it feeds millions of people around the world, boasts impressive sustainability practices, and follows strict quality standards. In this article, we will delve into the key aspects of Uruguay’s dairy sector and explore the nation’s unique approach to dairy farming.
Current International Context
The global dairy market has experienced changes in prices and costs since the second half of 2020, with a significant upward trend in both factors. However, starting from the second quarter of 2022, demand restrictions became crucial, leading to successive declines in the international dairy prices, which still remain relatively high compared to previous years. The local industry managed to benefit from the increase in international prices, resulting in higher export values. The industry passed on this improvement to the producers, who faced increased costs due to input prices and drought, leading to higher supplementation needs. The stock of dairy cows and milk production decreased, albeit to a lesser extent for the former, primarily due to increased individual productivities. Bank indebtedness of dairy farms continues to decline.
Foreign Trade
Exports
Exports in the period January-October 2022 increased by 18% in value compared to the same period in the previous year, primarily driven by price increases while sales volumes remained stable. Whole milk powder accounted for 60% of the export value, with an average price of $4,051 per ton, representing a 17% increase compared to the previous year. The majority of whole milk powder was sold to Algeria and Brazil, with China accounting for 18% of the sales.
Cheese, as the second most important dairy product, represented 12% of the export value, with a 7% increase compared to the same period in the previous year. The main destinations for Uruguayan cheese were Brazil, Mexico, and Argentina.
Skimmed milk powder saw a significant increase of 133% in value, primarily driven by a substantial volume increase of 84% and a price increase of 27% on average. The major buyers of skimmed milk powder were Algeria and Brazil.
Performance of the Dairy Chain at the National Level
Prices and Costs
Of the total liters marketed by the industry, 72% were sold in the international market, and 28% in the domestic market. The industry received an average price that was 18% higher than the same period in 2021, mainly due to the improvement in export prices (20%), while domestic prices also increased (16%) when measured in current dollars.
The producer price in the period January-September 2022 improved by 21% in current dollars compared to the same period in 2021, although average costs increased by 21%, resulting in a 2% increase in the purchasing power of milk in the first 9 months of the year. Concentrates had the highest increase within the cost structure.
Consumption
Uruguayans consume an impressive 230 liters of milk per capita annually, more than double the global average. The nation’s milk is free from growth hormones, antibiotics, heavy metals, and radioactive contamination, ensuring that consumers enjoy safe and healthy dairy products.
Milk Processing Industry
Uruguay’s dairy sector produces 2 billion liters of milk annually, with 90% of the production processed by the industry. The nation continuously improves its processes through the incorporation of technology, meeting the quality standards of the most demanding markets. Uruguay exports its dairy products to over 60 markets, including Brazil, Algeria, and China Russia.
Production
The country is home to 3,900 dairy farmers, with 73% delivering milk to processors and 27% producing artisanal cheese on the farm. Approximately 20,000 people are involved in dairy work, and most dairy farms are family-run. The cattle are primarily grass-fed and raised in open spaces, boasting internationally renowned genetics. Additionally, Uruguay maintains a 100% traceability rate for its cattle.
The average dairy farmer owns 150 milking cows and 250 hectares, producing an average of 18 liters of milk daily. Only 5% of the nation’s territory is used for milk production, yet it feeds over 20 million people each year, a population equivalent to seven times that of Uruguay.
Dairy Sector’s Role in Uruguay’s Economy
Uruguay’s dairy sector is responsible for the highest revenues from exports per hectare and is the 7th largest milk exporter globally. The sector is characterized by strong partnerships among various organizations, fostering a sense of unity and driving its dynamism. Dairy farmers deliver quality milk to processors while receiving technical assistance and funding in return.
Key Takeaways
Uruguay’s dairy industry is thriving and provides high-quality milk products to millions worldwide.
The country maintains strict quality standards and is committed to sustainability.
Uruguay’s dairy sector is a significant contributor to the nation’s economy, with strong partnerships and collaboration driving its success.
Dairy Sector’s Role in Uruguay’s Economy and Evolution
The dairy sector is crucial to Uruguay’s economy, accounting for 9.7% of agricultural gross product in 2015, with milk production being the third most important agricultural product after meat and soybeans. In that year, the total milk production reached 2,141 million liters, with 93% processed. There were 3,919 dairy farms, and 73.4% of them sold their produced milk to the processing industry. The total land used for dairy farming was 771 thousand hectares.
Dairy exports accounted for 8.1% of Uruguay’s total exported goods and 11% of agro-industrial products in 2015. Dairy farming is also an important employment source, with the number of permanent workers accounting for 12.8% of the total permanent workers in the agricultural sector. The dairy sector has shown continuous growth since the mid-70s, with significant changes in its productive structure, leading to a more dynamic industry.
Technological Advancements and Challenges in the Dairy Sector
Technological advancements have played a key role in increasing the productivity of the dairy sector in Uruguay. The extensive pastoral production system based on natural grasslands has evolved into an intensive farming system with cultivated pastures and the use of feedstuffs. This process of change and transformation has allowed for a more intensive production system, resulting in higher productivity levels.
However, the adoption of new technologies has had some adverse effects on farmers. For many, the intensification of the dairy farm production process involved an increase in the scale of production, which small or family farms may struggle to access due to financial capital or technology constraints. This has led to a decrease in the number of dairy farms, particularly small ones, while the productivity of larger farms continues to increase.
Despite the improvements in the dairy sector, challenges remain to ensure competitiveness in the international dairy market. Maintaining productivity growth and improving the efficiency with which available technologies are used will be critical in helping Uruguay’s dairy sector remain competitive in the future.
If you’re interested in learning more about Uruguay’s dairy sector or considering investing in sustainable and world-class dairy farms, don’t hesitate to contact us. Visit our UruguayFarms website at https://uruguayfarms.com/eng/index.php to explore available properties and farmlands and fill out the contact form for personalized advice. Our team of experts is ready to help you make informed decisions and contribute to this thriving industry.
Conclusion
Uruguay’s dairy farms offer a unique blend of quality, sustainability, and economic impact. By maintaining high standards and fostering strong partnerships, the dairy sector has positioned itself as a global leader in the industry. As consumers worldwide become increasingly concerned with the quality and environmental impact of their food choices, Uruguay’s dairy farms are well-positioned to meet these demands and continue their upward trajectory.