THE PRODUCT

• "The term cheese, defines the fresh or mature product obtained by separating milk serum or from reconstituted milk –whole, semi-skimmed or fully-skimmed-, coagulated by the action of curd and/or specific enzymes. It can be complemented by specific bacteria or organic acids and added colouring substances, spices or condiments”. Argentine Food Code (Decree No 111, 12.1.76 section 605).
• According to the fat content of the past dry extract, cheese is classified as: double cream, fatty, semi-fatty, lean and of skimmed milk.
• According to the maturing time and to the paste water content, they are classified as follows: soft paste or fresh cheese (45% to 55%), semi-hard paste (36% to 44%) and hard paste (27% to 35%).
• Melted cheese is not included in the classification by humidity content. It is obtained by grinding, mixing and melting one or more types of cheese by using heat and emulsifying agents.
• The conditions, requirements and characteristics for powdered milk are specified in sections 605 to 642 of Chapter VIII of the same Code.

THE PRODUCTION

• According to the FAO, in 2004 Argentina was the 9th cheese producing country in the world (with a share of 2.4%).
• In our country, cheese is the main destination of industrially processed milk, in terms of volume, with 39% in 2004.
• After reaching the historical record of almost 455,000 tons in 1999, the Argentine production showed a decrease of 27% until 2003. In 2004 there was an interesting upturn of 20%, until reaching 398,000 tons. While soft cheese grew only 13% in 2004, semi-hard and hard cheese showed a growing pace higher than the group general average, with increases of 28 and 31% respectively.

• The growth in cheese manufacturing evidenced in 2004 was mainly propelled by the domestic demand – around 80% of the additional production regarding 2003 was absorbed by the domestic consumption – followed by exports, with the remaining 20%.
• As regards paste, notice that 41% of the rise in the production and 77% of the exports growth were concentrated in semi-hard cheese, which became the category of better relative performance between 2003 and 2004.
• In 2004, the cheese production value was estimated in around $ 2,800 million, at wholesale level without VAT. 47% of this total corresponded to soft cheese, followed by sem-hard cheese with 30% of total value.

THE CONSUMPTION

• Between 1999 and 2003, the cheese consumption per capita in Argentina decreased 31% (or almost 4 k, from 12 k in 1999 to 8.3 k in 2003). In 2004 there was a dramatic recovery of 16% taking the consumption per capita to about 9.7 k/year.

• The evolution of each paste was quite different: while the consumption of soft cheese – that in 2004 represented 55% of the total cheese consumption- increased 11% between 2003 and 2004, the consumption of semi-hard and hard cheese grew 20 and 32%, respectively.

COMPETITIVENESS

• The share of our country in cheese world exports increased in the past decade, from 0.4% in average for the three-year period 1993-1995 to around 0.7% in average for 2001-2003.
• Argentine cheese reached 48 destinations all over the world in 2004.
• According to the database of the National Institute of Industrial Technology (INTI), the milk industrial sector had 4 ISO 9001: 2000 certifications in November 2004 for cheese.
• According to the same source, the sector also has a HACCP certification (Hazard Analysis and Critical Control Point). The same includes the milk reception, production, packaging and transportation processes of Tybo, Port Salut and Mozzarella cheese, at Williner’s plant, located in Bella Italia, Santa Fe.
• Finally, notice that there is a plant that has obtained an ISO 14001: 1996 certification (environmental standards series): this is for the designing, production, storage and delivery of yoghurts, desserts and cream cheese by Danone’s plant.

EXPORTS

• According to the last records available at the FAO, in 2003 and in terms of volume, Argentina was the 21st cheese world exporter (0.7% of the world total).
• In the past decade, cheese has been and still is, the second export product after powdered milk. In 2004, it represented 13% in volume and 16% in value of total exports.
• In the period of referente (1999-2004), exported volumen showed an erratic behaviour, without a clear tendency.
• In 2004, exports registered a strong expansion of 50% versus the previous year and reached a new historical record of 35,000 tons. The volumes sold represented a record income of US% 87 million FOB, as well, meaning a spectacular rise of 63% compared to the amount obtained in the preceding year.
• As a consequence of the import demand retraction by Brazil (our main destination between 1995 and 2000) and due to the new and advantageous post devaluation scenario, there was an interesting customer diversification process: in 2004 the product was placed in 48 nations, while in 2001 it was exported to 21 countries and a decade before, buyers amounted only to 16.

• The markets diversification is evident on analyzing the Herfindahl-Hirschmann (HHI)1 index, herein adapted to exports destinations. It is evident that after oscillating between 2400 and 2800 points in the period 1999-2003, it fell dramatically to 1400 points in 2004.
• In 2004 the three main destinations (USA, Mexico and Russia) represented between 59-62% of sales –considering volume or amount, as the case may be- and 12 countries individually represented purchases over 1% of the total volume.
• The subtypes placed vary according to the destination: while USA principally buys hard cheese (87% of their imports from our country correspond to such paste), Mexico and Russia import semi-hard cheese almost exclusively (93% and 94%, respectively).
• Between 1995 and 2000, inclusive, Brazil was the most important destination. From 2001 and to date, the leadership corresponds to USA.
• On the other hand, the international prices of Cheddar cheese have suffered marked oscillations in the past years and have evidenced quite shortly, their lowest levels –of about US$ 1500 /ton by mid 2002- and their maximum peaks – now over US$ 2,800/ton- in the last years.
• The exporting drive continues in 2005. During the first quarter of this year, cheese exports totaled 12 thousand tons and US$ 31 million FOB, meaning increases of 86% and 98%, respectively, as compared to the same period of 2004.
• The implicit average prices for the first quarter of this year were 3% and 9% higher than those of the same period in 2004, for soft and semi-hard cheese, respectively. On the other hand, the quotation of hard cheese fell 7% in the same inter-annual comparison.
• The main three destinations are still the same of 2004, but in a different order: USA, Russia and Mexico, with 61% of shipped volume.
• At present, the Extrazone Import Tax for the 28 rate positions proper of cheese (12 for soft, 6 for semi-hard, 4 for melted and 2 for hard cheese, among others) reached 17.5%, while the Export Tax is 5% for all cases. Reimbursements, both Intra and Extra-Zone, amount to 6% for products of higher value added (fractioned in containers of net weight lower than or equal to a weight depending on the product) and to 4.5% for those presented in containers of higher net weight.

COMPANIES AND TRADEMARKS

• Of the 70 sampled companies followed up by the Food Industry Direction, around 50 companies made some kind of cheese in 2003. Of this sample, 46 companies made soft cheese, 38 semi-hard cheese, 37 hard cheese and 12 melted cheese.
• It is estimated that the seven main industries concentrated almost 35% of the physical cheese production in 2003. Measured in terms of HHI, the concentration degree of the total cheese production is very low, with a value close to 240 points for 2003. Analyzing the group, the highest difference is observed between the three pastes, on one side ( with an HHI between 200 and 300) and melted cheese, on the other, with a higher concentration (of about 1400 points).
• Sancor is the most important manufacturing company in the cheese market in general, and of each paste in particular. Its leadership is higher as regards melted cheese and hard cheese, and lower for soft cheese, with an intermediate situation as regards semi-hard cheese.

INVESTMENTS

• The most significant investment flow in the milk sector occurred approximately between 1993 and 1998. Between 1999 and 2000, the investment pace went down dramatically.
• Finally, in 2003/04 the consolidation of the competitive exchange rate, the strong recovery of international prices until reaching record levels, the strong growth of raw material offer and the need for capturing this higher volume of milk to avoid the collapse of powdered milk plants, originated a new investment wave.
• In this context, many leading companies have faced and projected important investments, such as: Sancor (US$ 3 million in 2005 for reconditioning, equipping and enlarging several cheese plants) and Williner (US$ 5 million in 2004/6 for the construction of a new production plant of soft and semi-hard cheese).

BIBLIOGRAPHY

Labriola, S. y Guardini, E. 2005. Convenio SAGPyA – CIL–FIEL Dirección de Ind. Alimentaria, S.A.G.P.yA., Estadísticas varias de productos lácteos. En http://www.alimentosargentinos.gov.ar/lacteos/default.asp – FAO – INDEC - Diarios y revistas especializadas – Páginas de internet de varias industrias lácteas - Instituto Nacional de Tecnología Industrial (INTI).

MAIN CHAMBERS

Centro de la Industria Lechera (CIL), Medrano 281 (1178) CABA. Tel. (011) 4983-6149/0587; e-mail cilarg@cil.org.ar - Junta Intercoopertativa de Productores de Leche (JIPL), Chacabuco 2345 (3000) Santa Fe. Tel./fax 0342-452-0144/8805 int. 6236.