International Dairy Crisis: México case (a dairyman point of view)

Things have been changig here in México those weeks. Now dairies are in hard troubles. Not only milk price has fallen down, but the market is reduced now. "Crisis" is the most heard word those days. We've been asked from the plant to decrease our production in 20%, which is very hard. I understand in the USA there is a system to send out cows to cull them, here we don't have any similar; but anyway, many dairyman (specially smaller ones and with low quality) are sending out cows. There is a huge problem here: milk powder coming from out (USA and NZ mainly) at very low prices, and it pushes us down and out!. You can see, we all are on the same boat!.
On the other hand, but to make it even worst, our currency (mexican peso) is devaluating, we went from US$0.10 per MX$1.00 to US$0.07 per MX$1.00. It can be good if we assume it is going to make more expensive imported milk products (or at least "less cheap"); but we are in an industry that uses many international commodities: corn and soy are the most important, but also technology (from tractors, milking systems, parts, etc.), and more, like heifers, bull semen, medicine, and others. This makes our costs go up, while the milk price is going down, and market is reduced. At current rate, we are selling the milk at US$12 per hundred weight (aprox. to USA system, we get paid per kilogram actually).

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Comment by Troy Lenssen on April 13, 2009 at 3:38pm
Oh dont hold out for a buyout Godo. If we would spend our money on selling milk to a calcium defecient generation we would be better off in the long run. SInce the 1st buyout the milk price in the US has become even less stable and now is desperately worse then 5 years ago.
Comment by Troy Lenssen on April 13, 2009 at 3:34pm
You would think as Mexico become more productive in the dairy industry that the powder export market would be good for the industry. Like Uraguay and Argentina are trying to do. I did notice that the Uraguay company from NZ lost $9million US dollars last year on 30,000 cows. I just dont think that the NZ model of ultra-low input is going to be workable on large dairies.
Comment by Ryan Curtis on February 26, 2009 at 9:38am
It's hard to compete with the government. I think it's good that they help the poorer districts, but it shouldn't be at the expense of the dairymen. Efficiency is the key, but at some point you have to do more than break even or take out loans to survive. There are so many factors in the economy, especially as it becomes more of a global economy, it's hard to put a finger on ways to turn things around.
Would a national union work? One made up of just the Dairymen and workers that was able to unify their efforts. Then you could do education campaigns to improve awareness of healthy reasons for drinking milk, as well as increasing varieties of ways to use milk. Essentially creating demand. People don't buy what is not on their mind. As soon as people are thinking about milk they will buy it more often. Exports are good and should also be pursued, but if you have good demand in your own country you will be able to stay afloat easier.
Just some thoughts.
Comment by Godofredo Alba on February 26, 2009 at 9:08am
There are several cooperatives, they usally control milk production by a "quota" system to their associates. The biggest cooperative in México is Lala (from northern region called "La Laguna", in desertic states of Coahuila and Durango) they have 58% of mexican milk market, the next big cooperative is Alpura (from the central state of Querétaro) handling 30% of milk market, and the third cooperative is San Marcos (from north-central state Aguascalientes). There are other small cooperatives (La Concordia in Jalisco state, Leche León in Guanajuato state and others). But, there are some "freelance" dairymen (as ourselves!), we usually sell our milk to companies like Danone, Nestlé, Sigma (Yoplait brand), cheese factories, or the cooperatives (when they need extra milk, not now).
Currently, the Dairymen Unions from dairy states ("Unión Ganadera" means "Cattlemen Union" as well as "Dairyman Union", "ganado"="cattle" either beef or dairy.) are in meetings to government representatives (Economy, Commerce and Agriculture Secretaries) asking for help; gov. is giving MX$1 per liter (theorically, actually is less then that) to subside mexican milk boughts to the companies (not to dairymen directly), but it ends in feb 28. Also, there is a govenment companie called Liconsa that distribuites cheap (subsided) milk in poor/marginated areas (at US$0.72 per gallon!) and buys milk to small dairymen, althogh they buy many imported milk powder too; Liconsa usually buys near to 5% of mexican milk production, in the meetings they are trying to increase that this year (a problem, 'cause they only have an specific amount of money). Dairymen are asking to government to STOP importation of milk powder (which, by the way, is part of you excedent) and dairy products (many southamerican cheeses or from New Zealland), those products are here cheaper than it costs to produce them here; but it seems the milk powder price is actually at "dumping" prices.
And, what happens in "real life" is that the smaller producers are beeing pushed away, to retire; their quality is low (not always, but the most). Many of those producers are in Jalisco state (our dairy is here), and the option they had was going to USA to work (not only in agriculture), which now is not a good option, many of those that there were in USA working are comming back (in a near town actually came also two american citizen, whites not from mexican origin, jobmates to the mexicans! they are working here, anything is better than nothing I guess). Besides, the mexican factories are not very well either, mexican exports are in the most for USA (american companies), but exports are decreasing. Once again, crisis is what we are seeing.
In my experience, each one must find its own path. Efficiency is the key, no matter if you are in USA or Mexico, or Brazil or anywhere; everyone needs to find a way to produce milk in a cheaper way.
Comment by Ryan Curtis on February 25, 2009 at 3:54pm
So what are the dairymen in Mexico planning to do to turn things around? Do you have cooperatives or a way to organize yourselves in Mexico? I know you said you don't have an organization like CWT, but what organizations or options to dairymen in Mexico have?

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