Over the past decade a range of different developments has put increasing pressure on the milk sector. First, the Mercosul free trade agreement between Brazil, Argentina, Paraguay and Uruguay has opened up markets to foreign competition. This has particularly affected the markets for processed dairy products. Second, the Brazilian economy has been going through a process of adjustment. Implementation of the National Adjustment Plan began in 1994 but pressure has been mounting since 1991 when the government ceased to intervene in price setting in the dairy sub-sector. Third, poor soil fertility management and the increasing price of capital inputs have reduced the viability of soybean production, encouraging more farmers to turn to milk. Fourth, aggressive expansion by the Italian dairy company, Parmalat, has altered the traditional structure of the overall dairy industry and as a result dairy companies have been putting increasing pressure on small producers.
Although the situation remains fluid, two main responses to these changes are noted. The first involves the promotion of productivity-enhancing measures by NGOs and dairy development projects. The second is a spontaneous political reaction by farmers who have come together in a variety of modern and traditional organisations to resist change and promote their own vision of development.