Brazil is the biggest chicken exporter in the world, sending 3.96 million metric tons overseas in 2011, an increase of 3.2 percent on 2010, reports the producers’ association UBABEF. The country is the second-largest chicken meat producer. In 2011, Brazil produced 12 million metric tons, while the U.S. produced 16 million metric tons. The country moved ahead of the USA in the export stakes, however, in 2004, and has maintained its position.
Brazilian chicken exports in 2011 were worth US$8.2 billion, a 21.2 percent increase over the 2010 figure, and accounting for 3.2 percent of the country’s entire export trade.
In container terms, Brazil exported 320,404 twenty foot equivalent, TEU, in 2011 a 2.9 percent increase over the 311, 183 TEU dispatched in 2010, which was 9.78 percent higher than the 283,207 TEU exported in 2009. Growth is slowing, however. Although exports for first half of this year were up by over 4 percent, many sector managers believe that 2012 will be the “same as last year, and that once second half figures are available they will show that growth has tailed off.
Yet despite the success of the last decade, this year a number of Brazilian chicken producers are fighting for survival in the face of growing feed costs. Add to this the country’s overvalued currency, and it becomes clear why most forecasters are predicting that Brazil will end 2012 with export volumes and revenue similar to those recorded in 2011. This is a far cry from the 20 percent per annum volume and value increases of the early 2000s.
UBABEF President Franciso Turra has been in talks with the government, trying to emphasize how serious the situation is for his members.
Turra notes that Diplomata, the seventh-largest chicken exporter in Brazil, has closed two production facilities in the south of the country to reduce costs, and that overall Brazilian chicken production could be down by as much as 10 percent by the year’s end.
He adds that the price of soybean meal in Brazil jumped from R$600 (US$295.84) per metric ton last year to stand at R$1,300 per metric ton at the time of writing, continuing that the price of soya and corn made up “70 percent of all production costs for the industry.”
The UBABEF president has urged the government to take action, possibly by backing auctions to transport corn from the midwest regions of Brazil to the chicken producing areas of the south, stressing that the industry needs help during the “nightmare scenario.”
According to Turra, some producers are selling chicken for R$1.90 per kilo while production costs have reached R$2.10 per kilo.
However, the situation of the Brazilian industry is not without its bright spots, and in some export markets, particularly China, South Africa, Egypt and, especially, Saudi Arabia , the sector is performing well.
According to UBABEF trade manager Adriano Zerbini, there has been an upsurge in demand from many developing countries, to some degree compensating for a drop in demand from some developed countries, which have been struggling since the financial crisis hit.
He says: “Our members are responsible for 40 percent of all the world’s exports of chicken. In the first six months of this year we increased volumes by 2.7 percent, but we saw a decrease of 6 percent in value terms.
“The chicken sector is struggling terribly due to increased costs, especially feed costs. This is affecting not only Brazil but all chicken producing countries.
“Since the beginning of this year several of our members have been struggling to cope. They need to find a way to pass the increased costs onto consumers, but it isn’t easy. Many importing countries are having economic problems, and so it is difficult to pass on price increases.”
Zerbini points out that the smaller chicken producers, and especially those who specialize only in chicken, are suffering the most. He notes that some companies have better cash flow positions than others, and that the bigger concerns are, to some degree, protected by their size.
Yet due to a cut in Brazilian interest rates, exports are becoming more competitive again.
Rabobank, in its Poultry Quarterly report, echoed Zerbini’s and Turra’s statements, noting that soya meal prices in Brazil had risen 32 percent between March and June of this year and that this was causing a “challenging operational landscape.” Rabobank also reported that from January 1 to end of May, Brazil exported 1.7 million metric tons of chicken, up 6 percent year on year, although in terms of price there had been a 9 percent fall since December 2011.
Overall, Rabobank is confident that Brazilian chicken exports will grow by a few percentage points by the year’s end.
As our table shows, the chicken export business has certainly been brisk this year to Saudi Arabia, Hong Kong, China, South Africa and Egypt, with TEU shipment increases to all of them and especially to Egypt.
Zerbini says: “Our exports are growing to countries that are eating more meat (be it chicken or beef), such as South Africa, Egypt, China and other Asian countries. Each country has its preferences. The Chinese like wings and feet, and in Europe, they like breast and white meat, and in the Middle East they prefer whole chickens.”
From Brazil to the world
Henrik Simon, the director for reefer cargo at Hamburg Sud, notes that overall, exports from Brazil will remain fairly stable for rest of this year, but the regular 20 percent volume and price increases that were experienced in the early 2000s won’t be seen again for some time to come.
He says: “There was constant growth from 2000 onwards, but that has leveled off now, and many markets around the world are buying less chicken. After the first eight months of this year, our carryings are in line with our forecasts, which are for the same as last year, maybe with a slight increase. The weaker Real is offsetting some of the price increases caused by the increased feed costs.”
He continues that the consolidation among chicken exporters is having a profound effect on annual contract negotiations.
“It is no secret that there are fewer customers around for the shipping lines. Five years ago we were negotiating with 10 potential exporters [medium and large sized] but now there are only about four due to the various takeovers.”
The biggest market for all the carriers, as the figures in the table show, is Saudi Arabia, which imported 49,678 TEU of chicken from Brazil in 2011, which was a 12.4 percent rise over the 44,200 TEU taken in 2010.
In terms of the loading ports, Brazilian chicken exporters are very well served. The ports are mostly based in the south of the country – the states of Santa Catarina and Parana being responsible for more than 80 percent of all poultry exports from Brazil. The opening up for business of Portonave in October 2007 provided a sixth option (seven if the small port of Imbituba in the south of Santa Catarina is included, which handles a few containers of chicken), and since then an eighth option, the Hamburg Sud-backed Itapoa, has opened for business.
The main gateway for chicken exports is still the Itajai Port Complex, which includes the APMoeller terminal facility in Itajai proper and Portonave across the river. In fact, the complex comprises one of the biggest concentrations of reefer warehouses in the world. Many call it the “Chicken Export Capital” of the world.
The Hamburg Sud-backed port facility at Itapoa is relatively new when it comes to handling chicken, opening for business across the bay from Sao Francisco do Sul during mid-2011. Itapoa has already started to take business from Paranagua and Sao Francisco do Sul.