Brazil’s milk price hike should come to an end

In the 12 months through to August, a carton of milk became 60 percent more expensive for Brazilian consumers — making them a staple of the scorching food inflation the country has experienced since the pandemic first hit in March 2020.

At one point, a liter of milk on supermarket shelves in São Paulo cost 14 percent more than a liter of gasoline. Families began replacing milk with liquid and other dairy substitutes of negligible nutritional value to cope with price hikes. 

But the worst may already be over for Brazilians, experts believe. After rising by 25 percent in July, milk prices dropped by 1.78 percent last month, making it the main product responsible for slowing food inflation. According to the IPCA-15 mid-month consumer price index, milk prices went down by 12 percent in September.

Natália Grigol, a dairy researcher at Cepea, an economic research institute, says that to understand why prices are heading down, it is important to understand why they were so high in the first place.

“Since 2019, the main problem for dairy activity has been the continuous increase in production costs,” Ms. Grigol explains.

The pandemic worsened logistical bottlenecks which ended up creating an imbalance between global supply and demand for the sector’s necessary inputs, such as fertilizers for pastures, or corn and soybeans for cow feed. Production costs, therefore, skyrocketed.

The situation became even more delicate with the...