Nui Markets Mercosur—Market Access with Price Discovery for the Dairy Industry
By Otavio A. C. de Farias, Director of Sales, Nui Markets Mercosur
Brazil is a complex dairy market and a significant challenge for buyers and sellers of dairy products. Even though Brazilian dairy farms produce the third most milk by volume globally, the country imports far more milk (nearly 70,000 tons of milk equivalent in October 2023) than it exports (less than 3,000 tons in the same period). Based on post-pandemic impacts, this negative trade balance has become more significant since 2022.
Significant direct import tariffs have increased since the late 1990s to rectify the trade imbalance. Tariffs from outer Mercosur are at 28 percent, and non-tariff barriers, including an import licensing system, can make barriers even more difficult to overcome.
There’s domestic unrest as well. Domestic retail markets faced headwinds from March 2023 onwards. Massive dairy product import volumes at lower prices given weak world dairy markets kept domestic prices paid to dairy farmers low.
Data source: Secretariat of Foreign Trade (Secex). Prepared by OAA Brasilia
Data source: Secretariat of Foreign Trade (Secex). Prepared by OAA Brasilia
The chart below comparing whole milk powder price versus Brazil's import prices depicts a major price asymmetry for whole milk powder. Prices shown are from three sources: 1) Global Dairy Trade; 2) Mercosur prices for the same commodity imported into Brazil; and 3) domestic wholesale prices in Brazil. It is clear that, for several reasons, including market dynamics, the Brazilian market relies on imported dairy products to match supply and demand and smooth the steep pricing disparity.
Data source: Global Dairy Trade, Milkpoint Mercado
A negative trade balance, restrictive tariffs and domestic unrest toward imports create a daunting trifecta that makes it challenging for buyers and sellers in the Brazilian market. Because of the complex process, some companies refrain from participating in the market and go through a distributor or trader rather than sell directly to Brazilian buyers. A better process is needed to help buyers and sellers navigate the restrictive Brazilian market.
Nui Simplifies Trade for Sellers
The Nui Markets trading platform can help smooth out some of the complexities. The platform can help buyers and sellers from anywhere in the world mix and match their respective interests to arrive at a transaction.
End users and processors—buyers and sellers who actively trade their products—are best served by the Nui platform. Nui offers fixed-price trade and is the only platform to offer physical index-based trading, allowing buyers and sellers to bid and provide index-based commodities over the short, medium and long term. Participants on the platform acquire critical basis data information and can engage based on this information in real-time. Through the platform, buyers and sellers can make informed decisions, manage risk and optimize sales and procurement strategies.
The beauty of the Nui Markets trading platform is that there are no borders. With technology, we enable the markets to function better and with greater transparency. Buyers and sellers can see each other clearly without the opacity of the trading partners. We help buyers and sellers see the trading cycles in a way that they can, with a click, access raw material straight from any seller. The buyers and sellers can capture the value of the trade directly without an intermediary entity involved.
Nui offers three Marketplaces specializing in dairy trade: Nui Marketplace North America – for US-origin commodities, Nui Marketplace Europe – for EU-origin commodities, and the newly established Nui Marketplace International for access to broader export markets. If you are unsure what Marketplace is right for you, please reach out to discuss the best fit for your needs. otavio@nuimarkets.com