A recent report released by the Cepea Esalq/USP Center for Advanced Research in Applied Economics

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A recent report released by the Cepea Esalq/USP Center for Advanced Research in Applied Economics at the University of S ã o Paulo in Brazil shows that the rain disaster in Rio Grande do Sul has affected multiple economic sectors, with dairy products being one of the hardest hit.

On May 9th, the Brazilian website "sbtnews" reported that the rain disaster has hindered the entire process of the state's dairy industry from production to logistics, so product prices may perform abnormally and show an upward trend in the coming months. Andre é a Angelo, an inflation strategist at financial company Warren Rena, said that given the severity of the problem, this impact may affect the entire Brazilian market.

According to the survey, the milk production in South Rio Grande do Sul has shown strong growth since mid April this year, thereby increasing the supply of dairy products from May to July. This period coincided with the off-season for milk production in the southeast and central western regions, so the milk produced in the south was originally intended to meet the needs of other regions.

Cepea stated that multiple roads in the area are facing difficulties in drainage, which will undoubtedly cause "huge losses" to the industry, but the specific amount cannot be measured at present. Nowadays, many dairy factories have been forced to stop production activities due to reasons such as damage to building structures, power outages, and inability to go to farms to collect raw milk. Dairy producers who continue to operate continue to produce through less affected factories and seek alternative routes for product distribution. These routes increase logistics costs, which will lead to an increase in the final price of the product.

Cepea explained, "Dairy producers' supply channels to distributors are severely hindered, mainly due to the impact of rain in Porto Alegre and the central region of South Rio Grande. Currently, there are significant difficulties in the flow of goods, affecting not only the state itself but also other regions."

The report points out that energy scarcity is a core issue facing the entire industry. In ranches, power outages can hinder automated procedures such as milking and milk cooling. In factories, a lack of electricity can affect the processing and preservation of dairy products. The currently operating ranches and dairy factories mainly rely on fuel and generators for power, and the lack of these items makes it impossible for many areas in the state to continue producing raw milk and dairy products.

In addition, logistics issues are widespread, affecting both the transportation of milk and dairy products, as well as the acquisition of cow feed. The report states that many cattle herds experience a decrease in milk production due to malnutrition, and some milk is directly discarded because it cannot be transported out.