Brazil: swine prices try to react in the first half of June, but scenario remains difficult

Source:  SAFRAS & Mercado

The price of live pigs and the main wholesale cuts are looking for a recovery in the first half of June, with an advance of replenishment in the chain and adjustment in stocks. The bargaining power of independent pig farmers has improved, however, live prices are still far from allowing the return of profits in several states in the Center-South of the country, considering that the cost of production is still at a high level. As for the costs, expectations around the second corn crop are high, a factor that can bring relief to costs in the second half of the year. At the moment, corn prices are firm in the country, with market agents evaluating the account of export parity that has advanced recently and due to speculation around the intense cold and the possibility of frost in some parts of the country until the end of the fortnight. Monitoring the evolution of the US crop will be important over the next few weeks. A full corn crop in the US is key to price formation in Brazil in the second half of the year.

The attached graph shows the behavior of the average price of live pigs traded in the Center-South of the country. The point that draws attention is the lateral movement of prices. Things get more complicated with the oscillation band, which dropped this year with the advance of national supply. When prices reach the minimum of the band, pork can be sold more fluidly, and stocks fall. With that, the motivation for shaping stocks and prices advances abruptly. However, as prices rise, there is a difficulty in passing on prices, stocks begin to run aground, negotiations involving live pigs become harder, and prices melt down.

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