Brazil: Avian influenza outbreak changes market dynamics over the week

The scenario unfolding in the wholesale chicken market points to falling prices. This movement was also present in pork and beef. It is important to mention that the second half of the month presents an expected weakness in domestic demand. This movement intensifies over the week, with an increase in the domestic supply of chicken meat.

Some changes in the profile of negotiations are evident, retail chains have been more cautious in chicken meat purchases, as prices tend to fall further due to a weakened pace of shipments.

Authorities are keeping a close watch, and the number of ongoing investigations accurately portrays this situation. The measures adopted by the government, other authorities, and associations that rule the sector are proving to be quite assertive. Strict sanitary measures have placed Brazil in a privileged position in the global market, accounting for around 40% of the world’s exports. The response to this disease outbreak has been exemplary.

If current conditions continue, with only one case of the disease on a commercial farm, it is most likely that the flow of trade between Brazil and some of its largest importers will be quickly reestablished (China, South Africa, the European Union, and the Philippines). The expectation is that international prices for chicken meat will show a consistent upward movement due to the reduced availability of the product. The lack of supply to meet global demand is an important factor and is in Brazil’s favor now. The regionalization of embargoes is also very important for importing countries.

The Brazilian meatpacking industry should opt to keep products stored until they can be exported. With only one outbreak of the disease, Brazil should resume large-scale exports in less than 20 days. Thus, the stockpiles represent an additional cost for the sector. However, the overall losses would be mitigated.

It is worth mentioning that chicken farming has tools that can adapt supply to the challenges presented by the market. Since it has a shorter cycle, it is possible to make this type of adjustment more efficient when compared to cattle and pig farming. It is expected that housing cuts will be made. Prices should fall in the domestic market, but without aggressive movements.

The outbreak of Newcastle Disease in 2024 brings lessons for the sector. If the current environment continues, it is most likely that there will actually be some decline in prices with a sharp decline in the pace of exports in the weeks following the embargo. After this period of less fluidity in shipments, sales should show an accelerated movement, allowing the flow of the stored product.

Brazil urgently needs to review its health protocols. This premise is valid for all animal proteins sold by the country. The model adopted in bilateral negotiations with other major chicken meat producers should be used as a reference. Regionalized embargoes would mitigate losses, allowing for a strong export pace to be maintained even with the occasional occurrence of the disease.

Tags: pork, Brazil, prices, Beef, chicken, purchases, Market, chicken meat, demand