The dairy sector is an important segment of the Brazilian agribusiness. From the demand side, dairy products are the second most important in terms of household expenditure on food. From the supply side, Brazil is the 4th largest country in milk production with more than 32 billion liters per year. Moreover, nearly 1.3 million of dairy farmers are in operation, most of which characterized as small family farms. The rural credit is the main mechanism in terms of dairy policy. A program called PRONAF was created in 1996 to support small farmers by offering them special financial provisions, such as low interest rates. However, in 2013 the Brazilian Government through Central Bank imposed mandatory farm insurance as a condition to access rural credit. The impact of this policy on the dairy sector is unknown and this paper aims to evaluate such a policy. A structural econometric model of the Brazilian dairy sector is used to quantify the effect of that change on the production, consumption and milk price. The impact will be considered relative to a ten-year baseline scenario ending in 2022. Annual equilibrium prices are solved by minimizing the squared difference between supply and demand for four different markets: cheese, butter, milk powder, and fresh dairy products. Contributions to policy makers, private companies, and future researches are expected.


Downloads Statistics

Download Full History