Uruguay eyes Asia’s dairy market

Uruguay is a little country with more cows than people (by a ratio of more than three-to-one).

Yet it is a dairy export powerhouse, now increasingly looking to compete in New Zealand’s backyard – Asia.

New Zealand is home to Fonterra, the world’s biggest dairy exporter. By contrast, Conaprole, the Uruguayan dairy cooperative set up in 1936, accounts for only about 2 to 3 per cent of world powdered milk exports, Nelson Laurino, export manager, told beyondbrics.

But the biggest market for Conaprole’s mozzarella cheese is South Korea and it is also a large exporter of demineralised, or demi whey, to the Philippines. Who knew?

Conaprole’s natural export market is obviously on its own doorstep: Uruguay is Latin America’s top dariy exporter, with sales of 2bn litres a year, Laurino says, and Conaprole has well-established markets in Brazil, Mexico, Venezuela and Cuba. It also exports some cheese to the US. Uruguay’s dairy exports jumped 20 per cent in the first half of this year.

But Conaprole has been exporting for 40 years – its top products are powered milk, cheese, whey, butter and UHT milk. With regional markets consolidated, and Asia expanding as people get richer and tastes change, it is starting to look further afield. As Laurino says:

We are exporting more and more outside [the region], especially to Asia … Obviously there is strong competition there from New Zealand.

But Uruguay has some clear advantages, exporting 70 per cent of production and an outward-looking economy that make competing in Asia less unlikely than it might seem.

Carlos Pérez Castillo, the chairman of CGIAR, the consortium of international agricultural research centres, was upbeat about Uruguay’s chances, telling beyondbrics ahead of the second global conference for agricultural research for development, to be held in Montevideo at the end of the month:

If you look at the growth potential of the New Zealand dairy sector, it’s been growing so fast it’s reached a certain plateau now. Our [Uruguay’s] possibilities of increasing production are greater than in New Zealand.

Mind you, Fonterra has just reported record export figures, so maybe there’s a bit of wishful thinking.

Uruguay does not have New Zealand’s giant herds (though Fonterra, too, is a cooperative). But Conaprole’s success illustrates how a cooperative structure can bring benefits for small-scale producers. Indeed some of its 2,500 small-scale producers have as few as 10 cows, Pérez Castillo said. The company accounts for some 80 per cent of Uruguay’s dairy exports.

This year is the UN’s year of cooperatives and the research conference will highlight how Uruguayan agricultural producers have reaped rewards with integration and not just in milk: in the rice sector, integration right up the chain from some 300 producers to millers to exporters, enabled even small producers to cash in when rice prices more than doubled in 2008, Pérez Castillo noted.

No one is suggesting that Uruguay will sour New Zealand’s dairy dominance.But the country is carving out a growing niche for itself. And remember, this is the place that put corned beef on the map.

Related reading:
Grupo Gloria: Peru’s multilatina snaps up Uruguay dairy, beyondbrics
China wants a piece of Uruguay, beyondbrics