Brazilian swine market suffers from slowdown in exports and weakened domestic demand
Porto Alegre, January 29, 2021 – A difficult year start for Brazilian pig farming, with strong pressure on live pig prices, while feedstuff costs remain at a high level and with the prospect of stress in the coming few months. Corn, the main component of feedstuff, must suffer from a short summer crop, besides complications such as logistics concentrated on soybeans and rising freight rates.
Pork flow evolves at a very slow pace, leading to an increase in the stocks of slaughterhouses, bringing down pork prices. Given this situation, it is natural for industries to act with less impetus in negotiations involving animals for slaughter, seeking low prices. The first point to be noted is that domestic demand does not evolve satisfactorily due to the lack of liquidity of households, which cope with additional expenses at the beginning of the year. The end of emergency aid is also a negative point for consumption, with the fragility of the Brazilian economic environment becoming more evident now. Vaccination against COVID is a factor that can bring about a more favorable economic environment, but the mass immunization and resumption of economic activity will happen slowly. The advance of beef could favor the search for pork cuts, but in a harsh environment, most consumers tend to switch directly to chicken and eggs.
Besides the weak domestic demand, the pace of Brazilian exports slowed down last week, possibly due to reduced purchases from China. It is worth mentioning that the Lunar Year Holiday is arriving in the Asian country, explaining the lower buying interest at this time. According to preliminary data released by the Foreign Trade Secretary (SECEX) on the 18th, the daily average of fresh, chilled or frozen pork exported by Brazil was only 3.003 thousand tons until the second week of January. Following this average until the end of the month, plus the volume of industrialized products, January would close with nearly 70 thousand tons. The Chinese must act with greater intensity in imports after the holiday, considering that pork prices have risen again in their territory. Its pork production is recovering but there will still be a large deficit of animal protein in 2021. This week China lifted the embargoes imposed on two JBS plants located in Rio Grande do Sul (pork and chicken) and one plant from Aurora in Chapecó.
Another negative variable for live prices in the Brazilian market is the cost of production, imposing difficulty for pig farmers to keep animals on farms. The high cost of animal feeding must reduce the average weight of animals. Farmers must also pay attention to housing due to the cost and the prospect of a decline in Chinese imports from the end of 2021.
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