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Brazil's dairy industry is entering the second half of 2026 amid mounting pressure from El Niño, inflation and elevated imports, creating a challenging environment for both producers and processors, according to Rabobank. While profitability improved during the first half of the year, with net income per cow per day rising from R$23.30 in January to R$36.40 in May after feed costs, analysts warn that accelerating inflation, rising energy and food prices, and high household debt are weakening consumers' purchasing power and limiting dairy demand despite Brazil's projected 1.8% economic growth in 2026.
On the supply side, a forecast strong El Niño by the end of the third quarter could bring excessive rainfall to key dairy regions such as Rio Grande do Sul and Santa Catarina, while causing drier conditions in the Southeast and Northeast, reducing pasture availability and tightening milk supplies. Rabobank also expects dairy imports to remain high during the second half of the year, supported by stable international prices, a relatively strong Brazilian real and higher domestic milk prices, increasing competition for local processors.
Meanwhile, consumer preferences continue to shift toward high-protein dairy beverages, encouraging companies to launch more value-added products. The report also highlights that producers supplying more than 10,000 litres of milk per day are continuing to invest and achieve higher average prices, reflecting growing consolidation, efficiency and professionalization within Brazil's dairy sector. Overall, the market is expected to remain balanced but increasingly volatile as climate risks, inflation, imports and changing consumer demand reshape the country's dairy industry.
Source: Dairynews7x7 2 July, 2026 Read full story here
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