Dairy Outlook South America 2030: Can Growth Be Reignited?

Milk production in Mercosur countries (Argentina, Brazil, and Uruguay) has barely grown over the past ten years. This has been the result of competition from other sectors like grains and stagnant or decreasing domestic demand.

South America is losing global market share in terms of dairy production and exports, as other large players like the EU and the US have managed to increase their global presence over the past ten years.

While exports are an important source of demand, the domestic Mercosur market is the most relevant source of dairy demand. However, the domestic dairy market has struggled to grow in recent years in Mercosur countries, which is another key reason why demand for raw milk has stagnated. Low economic growth and stagnant or declining real incomes have been major causes for declining or stagnant per capita milk consumption. Consumers have had to adjust their food purchasing patterns to a new reality of shrinking paychecks on an inflation-adjusted basis.

Reigniting milk production growth this decade will be challenging, with low economic growth and stronger demographic headwinds, both of which will keep demand subdued.

The overall exportable surplus will probably see further declines, limiting the region’s role in the global market.