Milk Producers Face Price Speculation: FEMELECHE

Milk producers are facing the impact of price speculation by private companies within the food sector, as reported by the Mexican Federation of Dairy (FEMELECHE). In addition to these speculations, producers must confront the challenges of drought and a lack of support from the federal government, putting both their livelihoods and the self-sufficiency of dairy products in the country at risk.

Vicente Gómez, President, FEMELECHE, has brought attention to the recent challenges faced by milk producers due to unusual speculation in the purchase price of their product. This has resulted in a significant price drop, ranging between 14% and 23% from one week to another. Gómez pointed out that dairy producers in Mexico believe major buyers are creating a pressured environment to speculate, causing prices to decrease by up to MX$3/L (US$0.18/L).

In a press conference, Gómez explained that a few weeks ago, the average price of fresh milk was MX$10.50/L. However, there are now companies paying between MX$8 and MX$9/L. “There is no economic logic in speculation; we are talking about a 20% decrease in price from one week to the next. Otherwise, they will not make a purchase,” he stated.

Gómez emphasized that speculation is being coordinated by buyers, creating a delicate situation as it coincides with the increase in milk production at the beginning of spring. Additionally, he clarified that this situation only results in the destruction of production units, as the final consumer price remains unchanged.

At the end of January, ANPEC reported that rising prices of essential food basket items were preventing the population from maintaining a healthy diet, potentially leading to health issues, as reported by MBN. According to the association, in the last few months, the price of milk had increased by 59.58%, while other animal-derived products had surged by nearly 80%.

Gómez highlighted that the cost of milk production has risen by MX$40 to MX$50 per cow, increasing from MX$170-MX$180 to MX$220-MX$230, due to the drought situation in the country. The ability to maintain the herd depends significantly on the financial capacity of the producer, with fewer resources exacerbating the situation, as pasture needs to be purchased daily or weekly, leaving them in a vulnerable condition, he stressed. 

The head of FEMELECHE pointed out that, in addition to the expenses and speculations faced by dairy producers, government support for the sector is scarce. He emphasized that in Mexico, only one in 10 producers has access to credit, while farmers in the United States and China receive support, financing, and technology access, enabling them to cope with climatic phenomena and increased production.

Gómez underscored the importance of authorities reviewing the speculation situation, as operations of production units in the country are jeopardized at a time when food self-sufficiency is said to be a priority for the state. “We have been working for over a year to gather proposals into a plan that becomes campaign promises, and that these campaign promises turn into public policies and government actions by those who win,” he added.

The businessman pointed out that this situation could lead to an increased need for imports. “If we do not take care of the producer in Mexico, we will have to import more milk in the future. With these surpluses, we destroy the productive capacity of our country. If we allow destruction and speculation, we will never be able to achieve self-sufficiency,” Gómez said. 

In the past five years, the dairy sector has maintained an average annual increase of 9% in its production, surpassing 13 billion L last year, according to SADER. Jalisco stands out as the leading state in the dairy sector, contributing 20.7% of the national volume, followed by Coahuila, Durango, and Chihuahua.