March 31, 2026

 

Major crisis strikes Argentina's dairy sector

 

Argentina, one of South America's leading milk producers, is facing a deep crisis in its dairy sector, with plant closures, underused capacity and a market strained by delayed payments and layoffs.

 

Despite the woes, national milk production last year reached 11.6 billion liters, the highest level in a decade and the second-highest on record. Output grew 9.7% from the previous year, according to the National Dairy Directorate, a government agency that compiles industry statistics.

 

The contrast highlights a structural problem. Despite record production, many companies are not profitable. Rising input and energy costs, limited access to financing and shrinking margins have particularly affected mid-sized and regional firms.

 

"The central issue is the lack of profitability," Luciano Di Tella, director of dairy company Yatasto and a member of the Association of Small and Medium Dairy Enterprises, told UPI.

 

"It is a serious problem both at the farm level and in the industrial sector. That lack of profitability is the result of several factors. One of them is declining consumption," he said.

 

However, Do Tella noted that lower consumption is not the problem. Data from the Argentine Dairy Chain Observatory show that total consumption has not dropped sharply. Instead, patterns have shifted.

 

"More milk is being sold in plastic pouches or carton packaging, and more soft cheese. These are products that are sold almost at cost, with little margin," he said.

 

In contrast, higher-value-added products, including specialty cheeses, processed yogurts and desserts, have lost market share.

 

"Companies are maintaining revenue, but with low-margin products. Previously, more processed products generated profits," Di Tella added.

 

He also said primary production continued to rise over the past year, despite adverse weather conditions in some regions.

 

"There was record production, but sales did not keep pace, he said.

 

According to Di Tella, this imbalance has led to higher inventories and downward pressure on prices in the domestic market, where about 75% of milk is sold, reducing profitability across the sector.

 

High production costs further complicate the outlook. Di Tella pointed to Argentina's tax burden and long-standing inefficiencies that were previously masked by inflation.

 

"Now, every expense must be reviewed. Cutting a few cents on an input or improving a process can make a difference," he said.

 

The shift is forcing companies to adapt. Many were not prepared for this level of cost control, as much of their time was previously spent adjusting prices in an inflationary environment. The focus has now shifted to efficiency.

 

So far, the impact on employment has not been widespread. Automation is reducing some manual jobs, but creating more technical roles related to machinery maintenance and oversight.

 

Still, concern is growing among business leaders.

 

"Companies with many years of history have closed, and several others are in a fragile situation," Di Tella warned.

 

Industry representatives are calling for concrete measures, including access to credit under reasonable conditions to invest in technology, automation, and new product development.

 

They have also raised concerns about taxes. Di Tella highlighted local levies, such as municipal supply fees that require trucks to stop for administrative procedures, adding time and costs.

 

"Sometimes, the delay costs more than the tax itself," he said.

 

Other taxes include gross receipts taxes, a financial transactions tax and municipal safety and hygiene fees, which the industry often describes as hidden taxes with disproportionate costs.

 

He also pointed to the complexity of Argentina's interprovincial tax system, where gross receipts withholding across jurisdictions creates a fragmented and difficult framework that adds pressure on companies already operating with tight margins.

 

Dairy production is concentrated in the Pampas region, the country's main agricultural and livestock area, including the provinces of Santa Fe, Córdoba and inland Buenos Aires. The region is home to large companies, as well as many mid-sized firms that produce milk, yogurt, cheese, and other dairy products for domestic markets and some exports.

 

For decades, these companies have been key to processing large volumes of raw milk, while sustaining regional economies and generating employment in small and mid-sized towns.

 

However, that model is now weakening. In recent months, several plants have reduced activity or halted production. Without access to financing, some companies are considering restructuring as worker-run cooperatives.

 

In other cases, the situation is more critical. Some firms have stopped operating due to a lack of input or efficiency levels that are no longer sustainable. Their reopening remains uncertain as they await new capital.

 

The downturn is also visible at the regional level. In Santa Fe province, the local industrial federation reported a year-over-year production decline of more than 10% at the start of 2026, confirming the sector's fragility beyond national aggregate figures.

 

- UPI