New Milk Times

Production, industry and consumption five years after the discovery of fraud in the sector

Much has changed since the Public Prosecutor's Office - along with the Ministry of Agriculture and
the Agriculture Secretariat - started the first phase of Operation Milk Compensation on May 8,
2013. After the initial period, damage to the chain's credibility and of consumer mistrust, it was
necessary to invest to regain the image of the product - which can best be analyzed by the time five
years of the fraud detection is completed.

The impact of the Operation Milk Compensation can be verified by means of the numbers. 82
arrests and 98 seizures of vehicles were carried out. The total number of reported cases was 276,
with 17 people sentenced to up to 18 years in prison - some still serving a sentence in the semi-open
regime. It is estimated that the Terms of Conduct Adjustment (TACs) entered into with the
companies during the period resulted in R $ 12 million in compensation for collective moral
damages.

The operation resulted in 82 arrests, 98 vehicle seizures, 276 people reported and 17 sentenced to up
to 18 years.

The discovery of fraud has damaged the image of the industry, even those who have not been
involved in tampering. As a result, companies in the industry have created mechanisms to improve
control processes. Among the strategies are the payment of a bonus to the producer for quality, in
addition to the adoption of product traceability processes. Aiming to win back the public and foster
new consumer habits, the industry has also expanded the range of products.

Modernization also reached rural properties, where the producer was encouraged to replace the old
immersion coolers with tanks that reduce the temperature of the milk in a more homogeneous way.
But there are still barriers to investment within the property. The main one is the price paid per liter
of milk, the subject of complaint of many producers, who already coexist with losses caused by the
breakdown of companies denounced by the operation.

By the time five years of the first phase of the Compensation Milk Operation are completed, the
People's Mail has toured farms, industries and public agencies to tell what has changed since the
adulterations were revealed.

After that May 8, 2013, the promoters responsible for Milk Compensation did not imagine that it
would take another 15 operations against fraud in the following years. "Maybe they bet that we
would not be so over it, (that) we did one or two (operations) and we went to another priority", risks
promoter Alcindo Luz Bastos da Silva Filho of the Consumer Protection Justice Prosecutor's Office.
But the frauds continued, necessitating a near-total dedication of the prosecution to the case in the
first few months after the start of the operation - which included interceptions made on weekends
and holidays.

The day after the first stage, the prosecution received 1,200 e-mails with consumer complaints -
which gives a measure of the impact of the discovery of fraud, especially among customers of the
brands complained of. In partnership with the Ministry of Agriculture and the Secretariat of
Agriculture, the investigations continued and reached a total of 84 municipalities. 82 arrests and 98
seizures of vehicles were carried out. The total number of complaints was set at 276. The
convictions, 17. The figures are divided into 12 Compensated Milk operations and four
denominated Compensated Cheese, split from the original investigation. The MP also calculates that
the terms of conduct adjustment (TACs) entered into with companies during this period resulted in a
volume of R $ 12 million in compensation for collective moral damages.

The receipt of complaints involving food fraud, not only in the milk chain, led to the creation in
2016 of the Special Action Group to Combat Organized Crime (Gaeco) Food Safety, which is
currently coordinated by the two promoters who were ahead of Compounded Milk. "MP himself
felt that there was a need to pay attention to food fraud in general, much due to the beginning of the
Compensated Milk", explains Silva Filho.

The discovery of the fraud has caused about 15 companies to leave the market in the last five years.
"There was a hygiene of this chain, much from the awareness of the industry," says Silva Filho. In
all criminal and civil cases judged by the Judiciary there was condemnation, albeit in the first
degree. Several processes are still in progress.

The promoters Alcindo Luz Bastos da Silva Filho (E), Mauro Rockenbach (C) and the then
Assistant Attorney General for Legal Affairs of the Public Prosecutor's Office, Ivory Coelho Neto
(D), in one of the press conferences after the first phase of Operation Milk Compensation ado.
Photo: Marjuliê Martini / Divulgação

Origin of the investigation

The kick-off of Compensated Milk, with the unfolding of the first phase on May 8, 2013,
dismantled a scheme based on a simple mechanism, which was believed to be out of use. In October
2012, the MP, through an agreement signed with the Ministry of Agriculture, Agriculture Secretariat
and laboratories, began to receive analyzes that indicated the presence of formaldehyde in some
samples of raw milk. "We knew about this fraud about 30 years ago. In the time when there was no
cooler on the properties, it was used as a way of preserving raw milk, "explains Bastos Filho. At
first, it was suspected that the so-called false positive might be occurring.

Constant meetings with area technicians were necessary to try to understand what the fraud was.
Until it was found that formaldehyde was a component of agricultural urea, used by fraudsters with
the intention of masking the addition of water to raw milk - which caused the freezing point of the
milk to approach zero degrees. According to Bastos Filho, routine analyzes specific to this
component were not being performed by dairy products, which they believed to be a practice in
disuse. "Due to the remuneration of dairy products and warehouses for the volume of milk
transported, some smart people in the middle, mainly transporters, were adding water and selling at
the price of milk," the promoter adds.

But how was it possible to detect fraud, if urea was used just to mask the addition of water? The
answer is linked to a change put into practice by the fertilizer industry. Rural producers used to
complain about the evaporation of urea - that is, the material remained in the soil for a short time
after application, influenced by climatic factors. The companies in the industry, then, put on the
market a more resistant urea, with a kind of film around the grain that maintains the effectiveness of
the product for more time. This product contained formaldehyde.

"The milk fraudsters did not notice this change in urea composition and continued to use it. It was
there that he appeared ", observes Mauro Rockenbach, of the Prosecutor's Office of Specialized
Criminal Justice. Fiscal notes requested by the MP proved that the purchase of urea was already a
practice adopted for years.

The fraud was nothing innovative, but highly profitable. Before the Milk Law came into force in
2016, the fraudsters were subject to an administrative fine of R $ 15 thousand. "Sometimes, one
morning the larger fraudster could get that value," says Silva Filho. The federal legislation - the
Regulation and Industrial and Sanitary Inspection of Products of Animal Origin (Riispoa), updated
in 2017 - dated until then of 1952.

Over the course of these five years, research has uncovered varied techniques to "fix" the milk. If
the product was acid, an alkaline substance was added - in this case caustic soda. If the problem was
the microbial action and the proliferation of micro-agents, an antiseptic solution was used -
hydrogen peroxide. To make volume, the strategy was adding water and urea. "When a problem
arose, they stabilized or masked it and went into the industry," says Rockenbach.

New reality

The two prosecutors recall that, in the beginning, the action was criticized for causing "damage to
the State". Some commercial establishments in the Southeast region even announced that they were
not selling Gaucho milk. Five years later, the advance in the industry resulting from the
investigations can be proven by the scarcity of samples with indication of fraud.

"Today I have the peace of mind to say that Gaucho milk is the best quality in the country, it is the
most supervised and we do not receive information about adulteration," says Rockenbach, who
claims to buy only gaucho milk when he goes to the supermarket. Advances in the evaluation of the
promoters are related to the fact that industries have a greater concern about the milk they receive in
their plants. "In short, we did our homework," adds Silva Filho.

MP members also commend the decisions of the Judiciary, which they consider to be commensurate
with the public health risk of fraud. In one case, the conviction at first instance resulted in an 18-
year prison sentence - then reduced to 16 years by the Court of Justice. Sentences include a
combination of crimes, such as gang-making, money laundering and fraud, among others. "The
Judiciary provided the answer to the exact need for punishment," says Rockenbach.

Future of the operation

The last phase of the Milk Compensation operation took place in March of last year. Complaints
continue to be received by the Public Prosecutor's Office, but new frauds have not been proven. The
information comes through both the consumer and representatives of the industry itself. "Sometimes
some competitor talks about the other, we check, ask for analysis, and the results are good. If this
will continue, only time will tell, "says Silva Filho.

Rockenbach, for his part, adds that many of the complaints are not indicative of fraud, but rather of
quality. According to him, the operation remains attentive, but the future will be defined by the
segment itself. "If there is no more fraud, Milk will die from starvation," he says.

Consumer orientation is for him to seek out information about the brand he will consume in order to
be loyal to certain products considered reliable. It is also advisable to be suspicious of prices that
are far below normal. "There are no great magic in this segment. Profit margins are not so large as
to justify one product costing half the value of another, "Silva Filho notes.

Although the research targets represented a small group, all industries, producers, transporters had
to remedy the impacts of fraud. With one of the largest dairy products in the country - in 2017, the
RS industrialized 3.4 billion liters, being behind only Minas Gerais, according to the IBGE - the
industry of Rio Grande do Sul had to assume the role of investing high in quality control of the raw
material in all its trajectory, from the pasture to the packaged product.
The dairy chain handled around R $ 12.3 billion in 2016, equivalent to 3% of the GDP of Rio
Grande do Sul

Uncomfortable for the industry at first, the Milk Compensation operation became an opportunity to
execute the necessary improvements, in the evaluation of the president of Sindilat, Alexandre
Guerra. "We were able to make a bigger leap of improvements than we had been doing," he says.
Companies began investing in laboratories, equipment and technologies to increase the number of
milk tests and qualify the analyzes.

In addition to tracking the product, the industry adopted a new relationship with the milk carrier, in
compliance with Law 14,835, of 2016 (the Milk Law), which regulated processes on this hitherto
poorly monitored figure. The middlemen, those who bought and resold the milk to the industry, had
to be eliminated. "This gave us credibility," Guerra says. The law also mandated the industry to
train transporters periodically and check that the trucks are used exclusively for dairy transportation
and are properly identified.

Dairy was also charged by the company for improvements in milk quality. The strategy used was to
encourage the payment of "premiums" to the producer for milk that meets quality standards. Some
companies have already adopted the bonus well before Compensated Milk, but others have become
more adept after 2013 as a way of "pushing" for improvements, Guerra recalls.

More recently, for example, some companies have included in the rebate calculation the cooling
system item. The idea is to encourage the producer to migrate from the immersion cooler (jars) to
the direct expansion chiller, the most effective equipment to keep the temperature of the raw
material within the required limits. Emater's survey pointed out that, from 2015 to 2017, the number
of producers with direct expansion chiller increased from 72.4% to 87.5%. Other indicators that
form the bonus are the Somatic Cell Count (CCS), the Bacteria Count (CBT), milk fat levels and
the tuberculosis and brucellosis tests.

Premium for quality

Created in 2016, after the emergence of Compen $ Milk Milk, Dielat, a company from Taquara,
gives producers a boost by taking into account the indicators listed above. The payment of the
"premium" is made, according to the manager of Captation of the dairy, Júnior Cardoso, through the
results of analyzes generated in an external laboratory, to give more credibility to the bonus policy.
He says that the "prizes" have not turned into large investments in properties, due to the crisis in the
sector that has extended in the last year, but he understands that the most important of this
remuneration is to motivate and to make the producer aware a better raw material.

According to Cardoso, from 2016 to here many producers were eliminated because they did not
meet the expectation, within what is required by Normative Instruction 62 of the Ministry of
Agriculture, which establishes the quality standards of raw milk produced in the country. "The
producer has a period of adaptation. If it does not adapt, it is out of the process, "he says. "The vast
majority managed to evolve, but some, out of lack of understanding or will, came out," he reveals.

Aiming at quality, Dielat also invests in technical assistance. In his first year of operation, he joined
the Better Milking program of the Dairy Sector Chamber of the State Secretariat of Agriculture to
help, through good practices, those producers who had the greatest difficulty in increasing milk
quality. 14 properties participated in this work. The dairy also counts on two technicians who, daily,
work in the establishments in the field.
There are currently 225 dairy products in operation in Rio Grande do Sul

Sindilat's president, Alexandre Guerra, says that all companies are encouraged to invest in technical
assistance projects, because it is understood that the higher the quality of the milk that arrives at the
company, the more it can innovate in its products and awaken new habits of consumption. Evidence
that this development has already occurred in the industry is that dairies have made a series of
launches to reconquer the consumer and meet market niches. In the last five years, zero lactose
dairy products, sodium reduced products, milk enriched with probiotics, etc. have been created.

According to Guerra, in 2016, of the total milk processed in Brazil, 2.5% was destined for the
special line, mainly for the manufacture of milk with low lactose content. In 2017, the percentage
passed to 3.3% of the total processed.

He points out that the industry has learned many lessons in recent years and emphasizes that
industry "has no other intention than to continuously increase quality." "The industry does
everything to maintain its brand's enormous value, innovating and taking responsibility."

Traceability advances

The self-control implanted by the industry of Rio Grande do Sul allowed advances in the
relationship between productive and consumer sectors. One of the most recent episodes in this sense
is the traceability of milk. A year ago, the Languiru cooperative, based in Teutônia, implemented a
QR Code system on UHT packaging, which allows the consumer to research with the smartphone
information about the quality of the raw material and its production process, such as fat index,
acidity, density, cryoscopy, pH, temperature in the process of ultrapasteurization, time of packing,
among others.

"This is a consequence of Milk Compensation and its actions. On top of that, we specialize, "says
Languiru President Dirceu Bayer, who defines the MP's operation as" a necessary process at the
time. " The cooperative - which has not been accused of any irregularities - also invested in
laboratories where 5,000 analyzes are carried out every month, from fresh to finished products,
including physicochemical and fraud analysis. Among the analyzed items are the presence of
formaldehyde, sodium hydroxide, starch, urea and acidity levels.

In the case of Languiru, the implementation of traceability is facilitated by the logistics of the
cooperative, which collects milk within a maximum radius of 30 kilometers from the headquarters
of the dairy, located in the district of the same name. There are 2,000 producers in and around
Teutonia. The production is 12 million liters per month. The optimism with the moment of the
sector causes the cooperative to calculate a 12% increase in revenues for the year 2018, which
would represent a total of R $ 1.3 billion.

Analyzes show improvement

The result of milk samples analyzed in the last five years by National Agricultural Laboratories
(which are part of the Lanagro network) show an evolution in compliance rates since Operation
Milk Compensation was started in 2013. The percentage of raw milk cooled does not show
deviations in the parameters today is close to 90%.

However, this does not mean that the remaining 10% represents some risk, since that portion of the
product does not reach the market. "We are practically 100% quality with respect to the milk that
reaches the consumer," says Leonardo Isolan, head of the Animal Products Inspection Service
(Sipoa), Superintendent of the Ministry of Agriculture in Rio Grande do Sul.

In 2013, in the first year of the Milk Compensation, 2,681 samples were collected, of which 1,683
(63%) were within legal standards and 998 (37%) presented nonconformities. Photo: Guilherme
Testa

At the height of the Compensated Milk Operation, in 2013, 2,681 samples of refrigerated raw milk
were collected in establishments with federal inspection, of which 37% (998) presented
nonconformities. A year later, this index fell to 26%, based on 2,793 samples. In 2015, between
January and March, the percentage fell again, to 22%, after the analysis of 263 samples. Last year,
the 714 analyzes of raw milk in the SIFs of Rio Grande do Sul reached a compliance rate of 88.5%.

The progress in the quality parameters is also noticed in the national statistics, when they are taken
into account analyzes carried out in the other Lanagros of the country. In 2016, 1,085 samples were
collected, with a compliance rate of 82.67% for microbiological parameters and 77.03% for
physical-chemical parameters. "Considering the evolution in milk quality that comes from dairy
stables for companies, there was a significant improvement jump," Isolan points out.

The data point to a reduction in the occurrence of fraud to increase volume, with the use of
substances such as urea, formaldehyde, ethyl alcohol, among others. However, according to Sipoa /
RS, actions aimed at masking milk quality, due to hygiene problems in milking, storage, collection,
poor refrigeration, as well as collection of milk on the farm more than 48 hours after production .
"They are deviations from good manufacturing practices, not necessarily fraud," says the head of
the inspection service.

The detection of nonconformities resulted in official actions of the Federal Inspection Service (SIF),
such as infraction notices, interdiction of establishments and adoption of the special inspection
regime. Since 2013, the tax assessment notices have resulted in fines totaling R $ 8.6 million.

Demand originated new method

The frauds reported by Operation Milk Compensation were largely found in the laboratory of the
Lanagro (National Agricultural and Livestock Laboratories) network located in the South zone of
Porto Alegre. In the initial period of the investigations, the large quantity of milk analyzed caused
that the demand increased, which gave rise to a new method that has been adopted to check the
conformity of the samples, that allows to analyze of faster form, in up to 24 the presence of several
substances in 60 samples. Until then, it took two weeks.

The old method used the distillation of milk. With the change, a reagent substance was adopted for
the formaldehyde. "After the initial stage (of the operation), we had a large volume (of analysis) still
resulting from the monitoring to verify if the fraud situation was maintained or not," says Lanagro /
RS coordinator, Fabiano Barreto. Initially, the milk analyzed by the laboratory came only from
establishments with federal inspection. However, with the increase in demand, the range of
performance eventually expanded to the other dairies.

Currently, on average 73 dairy samples are analyzed by Lanagro per month. Although the
nonconformities are falling, Barreto highlights the need for vigilance to be maintained. "So our
interest is to work actively, prospecting other frauds, working with more sensitive methodologies
and with greater predictability, so that we can anticipate situations of fraud," he argues.
The new law

In December 2015, the Legislative Assembly approved the project known as the Milk Law (Law
No. 14,835). Prepared by technicians from the Department of Agriculture and sector entities, the
law is cited as one of the main innovations of this period, having instituted a quality program in the
production, transport and commercialization of the product, and rules to prevent fraud. The text was
sanctioned in January 2016. Later that year, the regulatory decree and a normative instruction were
published with the objective of operationalizing the measures envisaged.

The law has generated advantages that go beyond punishments in the form of fines. According to
the state agriculture and forestry inspector Karla Prestes Pivato Oliz of the Agriculture Secretariat,
one of the main points was the establishment of a new rule for the commercialization of milk,
prohibiting the carrier from participating in this stage. The carrier became remunerated only for the
provision of service and no longer for the volume of raw milk transported.

Without paying the carrier for the amount of milk collected on the properties, the motivation of the
frauds that consisted in adding water and other substances in the milk to increase the volume or to
disguise the poor quality of the raw material collected was eliminated. The law also mandated that
all transporters be registered by industry or refrigeration stations, undergo training every two years,
and identify the vehicles used for transportation with adhesives.

Acting for 40 years in the transportation of milk, Ernesto Corrêa da Silva has participated in
training for four to six months at the company Dielat, in Taquara, for whom he provides the service.
He says that since prior to the Milk Compensation operation, he was already testing the properties
before transferring the milk to the truck. And when you notice changes in two items that you have
to check - temperature and stability to alizarol - nor collect the product. It is also up to the
transporter to complete a spreadsheet with the route identification, producer name, collection time,
volume collected and others. "Our milk is the best it has in Brazil," he says.

Another contribution of the Milk Law was the fixing of fines for the transporter that can be applied
by the inspection and official inspection service, be it municipal, state or federal. "Until then, the
carrier was fined by the Ministry of Agriculture, the Judiciary, but could not be fined by the
inspection service because there was no provision in law for that," observes Karla of Seapi. The
prosecutor says she is satisfied with the outcome of the Milk Act because it "made every chain link
more aware of its importance." "Those who did not want to work within the framework of the law
were automatically eliminated. It was natural selection, "he says. "The law will not be able to
prevent fraud. But if today we get the fraudster we have a legal mechanism to punish with rigor, "he
warns.

Denise Fraga, a professor of veterinary medicine at the Regional University of the Northwest of the
State (Unijuí), with several studies in the field, believes that for the producer, the law brought
benefits, because it guaranteed that the milk leaving the property will arrive in the industry with the
characteristics. "It is a law that protects the farmer, which has brought a sense of security." It also
considers that the law has even provoked a change of position in the field. For her, the producer is
more aware of his duties and rights, are increasingly informed and seeking in institutions for
answers to their problems. The State Department of Agriculture has not reported whether the state
inspection service has already imposed fines based on the Milk Act. The Ministry of Agriculture has
reported that it has not applied any fines so far using the Milk Act.

Ministry opens public consultation

Since April 26 of this year, the Ministry of Agriculture has opened a public consultation to receive
suggestions to change normative instruction (IN) 62, which, among other things, establishes the
quality standards of raw milk produced in the country. Entities, researchers and institutions have
until June 24 to submit proposals. IN was last revised in 2011 and set limits of up to 500,000
somatic cells per milliliter (CCS) and 300,000 colony forming units per milliliter (CBT).

In principle, the required levels of CCS (indicative of inflammation in the udder) and of CBT
(bacteria present in milk) should be maintained, since a significant proportion of producers still do
not meet current standards, nor would they be able to meet stricter levels of quality .

The Ministry already said that the main modifications of the IN should be the reduction of ten to
seven degrees of the maximum temperature of the raw milk; analysis requirement in dairy for
checking the presence of antibiotics or products intended to defraud milk; and requirement of
microbiological control (bacterial count) in the product received and stored in the dairy.

Technology in the midst of instability

Since February, work on the property of the Meinerz family, in the interior of Estrela, is done by the
carousel system, acquired in the last edition of Expointer. The equipment, which can simultaneously
milk 24 cows, has been the subject of curiosity among neighbors. "Who looks is impressed," says
producer César Meinerz.

Meinerz and his father, Bertoldo, decided to invest in state-of-the-art technology, even without
being satisfied with the price of the liter, which is currently at $ 1.29. The choice was made after the
two analyzed various options, such as robotic milking and quick exit rooms. The idea is that the
carrousel allows the family to increase the number of lactating cows from 100 to 150 and reach
5,000 liters per day until next year - today the daily production is 3,1 thousand liters. "If you do not
make a good average of liters, (the activity) is not paid, because the diet is too expensive, the inputs
have gone up a lot and the price of milk is not helping as it should," explains Meinerz.

Milking occurs at 5:30 a.m. and 5:30 p.m. The animals access the turntable for an individualized
access. Once inside the carousel, the milking process begins. The collected milk follows directly
into the refrigerated tank, through a piping system. The system also identifies suspected mastitis in
animals.
The technology allows family members to optimize working time, since before each milking took
up to two and a half hours. Today the work is done in an hour. By reducing the pain of work,
Meinerz also thinks about family succession. "The idea is to hold the children on the property," says
the producer, father of Francine, 23, and Jenifer, 13. Meinerz now assesses the possibility of
investing in solar energy.

A few kilometers away, in the interior of Teutonia, the routine of Astor and Sirlei Gerhardt begins at
4:45 a.m., when the couple wakes up, prepares the chimarrão and initiates the first milking of the 56
cows of the Dutch breed. The "beds" of the free-stall system, made of sawdust, need to be redone
twice a day, which guarantees greater comfort to the animals. The routine is exhausting, but the pain
has been reduced with recent investments made in the property.

In addition to the implementation of the free-stall, the milking parlor was also remodeled, with new
equipment. The son of the couple, Rafael, 24, has been monitoring for two years the performance
through software developed by Esalq / USP, which makes it possible to compare production with
properties throughout the country. Information such as dates of inseminations and births, which
were previously recorded by hand, are now filled in on the computer. A monitor located above the
milking machine allows you to see how much milk each cow is giving.
The investments allowed the family to reach a productivity jump in the last four years. In 2014,
when the system was deployed, daily production was 800 liters. Today they are 2.2 thousand liters,
number that reaches 2,7 thousand during the winter. The problem is that, in the evaluation of the
couple, the price currently received by the liter - around R $ 1.25 - is insufficient compared to the
amount that was disbursed to effect the investments. To make matters worse, the bankruptcy of the
company to which they delivered the milk, after investigations by the Public Prosecutor's Office,
caused the couple to stop receiving the amount equivalent to one month.

Astor Gerhardt is a producer in Teutonia. Photo: Alina Souza

The situation led the couple to think about selling the animals. "It is almost impossible to produce
milk. If I could sell, I'd sell. But we have hope that it will improve, "says Sirlei. Because of his
father's influence, milk has always been the main activity of Astor, who has also worked with pig
farming. "We stopped with the pig and we invested only in the milk, hoping that one day it would
improve. It was good, until suddenly it was chaos, "he recalls.

The adaptation to the new times is also visible in the diet of the animals. In the past, the animals
received feed based on corn grass, elephantgrass and sugarcane. "We stuck and we treated all this,
(we put) a ration over and gave," recalls Sirlei. The increasing demands of the industry have caused
food to change. Today the animals receive silage, pre-dried, rations, mineral salt and hay. The
estimate is that the food item represents 65% of the total.

Demands increased

The discovery of the frauds in the sector caused that industry increased the demands to the producer
of milk, which caused a transformation in the activity. To remain in the business, many producers
had to invest in the property in order to increase both the quantity and quality of production.

"Serious companies have to get more control over the raw material entering the industrial plant, not
only in terms of quality, but also the structure of the producer, "says Jaime Ries, state technical
assistant at Emater. The immersion (jar) coolers have been replaced by tanks which reduce the
temperature of the milk more evenly and in a shorter period. There were also investments in hot
water supply, which enabled improvements in the hygiene of milking and cooling equipment. "The
medicine was bitter. It's a pity that a lot of people have suffered and had a great blow, but it's
inevitable that the chain goes through a process of selection and specialization, and that's what we're
seeing, "Ries adds.

One of Emater's main tasks was to assist in the development of equipment credit projects, such as
direct expansion tanks. The entity also acts with a focus on property management, defending the
importance of cost control and planning. But it was not just that. The fact that many producers were
left without receiving or without industry to deliver the milk, due to the bankruptcy of companies,
was also a challenge for extension workers. "It was more of a psychologist job. How are you going
to work for a producer to recover if he does not have an alternative? "Asks Ries.

The scale of production was also impacted by the crisis, especially in the last three years. By 2015,
45 percent of farmers took up to 50 liters of milk a day, according to Emater. Two years later,
19,000 Gaucho producers stopped delivering milk to the industry - most of them belonging to the
smallest production range. So much so that the average liters per property went from 134 in 2015 to
170 in 2017. Another survey, which collected data on 3,500 properties, pointed out an average of
233 liters per day. "The producer who stays (in the activity) is specializing. And to the extent that
some specialize and increase the volume of delivery to the industry, if there is no increase in
demand, of course some leave, "notes Ries.

Officially, there is no talk about a minimum production for milk to be collected by industry, but
generally, producers with less than 100 liters / day are increasingly scarce. According to the
extensionist, these producers were not exactly "excluded" by the industry. "A large part was waiting
for an opportunity to leave," he explains, referring to the absence of labor, difficulties in relation to
succession, painful work and little income obtained with smaller production scales.

Responsible for 60% of production costs, animal feed is another concern of rural extension, with the
incentive to produce it "indoors" in order to reduce costs. "The producer has to be conscious in the
use of more expensive foods, such as silage and feed, and make good food base in the property from
what has structure in the property," the specialist explains. The idea is to encourage the farmer to
use forage in a large part of animal nutrition, preferably with the cow grazing.

In the Ries evaluation, this "forced" specialization of the segment may be important for the
productive chain to reap the rewards when there is a rewarming demand for the product.

Published on 05/06/2018
Correio do Povo/Porto Alegre (Brazil)