Brazilian poultry feed demand to rise above forecasts

While sales lagged for poultry and poultry feed during the first half of 2015, demand for Brazilian chicken in international markets is increasing.

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Poultry feed production which accounts for 48 percent of all feed produced in Brazil, is forecast to grow by 3.4 percent this year, but there are indications that by year-end, forecasts may be beaten.
Poultry feed production which accounts for 48 percent of all feed produced in Brazil, is forecast to grow by 3.4 percent this year, but there are indications that by year-end, forecasts may be beaten.

Brazilian demand for poultry feed this year has been forecast to expand by 3.4 percent, but that prediction may yet prove to be cautious given the spike in international demand for Brazilian poultry meat that occurred in June.

The Brazilian economy is expected to record its worst performance this year since 1990, offering little cheer for those sectors that operate, or whose clients operate, exclusively in the home market. Employment and inflation are rising, and household consumption contracting. This is having an impact on demand for poultry meat and eggs and, consequently, demand for poultry feed.

The international market for Brazilian exports of poultry meat was similarly weak during the first quarter of this year.

Despite a devalued currency, slowing growth in China, a weak European recovery, and the imminent rise of interest rates in the U.S. all contributed to weakening demand for Brazilian chicken.

Between January and April 2015, the volume of chicken meat exported from Brazil declined by 2 percent in comparison with the same period last year, reports the Brazilian Association of Animal Protein (ABPA). In the dollar terms, the contraction was even worse, with sales 11.8 percent lower.

Despite these difficulties, the Brazilian chicken meat industry still bought more broiler feed during the first quarter of the year.

Broiler feed sales

Animal feed association Sindiracoes notes that demand for broiler meat on the home market was also weak over the start of the year. Broiler chick placements, however, still increased by 3.5 percent and this, combined with the cost of corn and soya meal being stable, translated into sales of broiler feed rising by 2.3 percent to reach 7.7 million tons.

No upturn in chicken consumption on the home market is expected any time soon and there is even some evidence that the price of chicken meat may rise over coming months, making purchases even more difficult for consumers facing an uncertain outlook. 

In mid-June, Sindiracoes forecast that demand for broiler feed could reach 32.3 million tons for 2015 as a whole, an increase of 3.1 percent, boosted by a degree of higher demand from overseas markets seeking alternatives to poultry products from the U.S., which continues to struggle with avian influenza.

However, this forecast may have been somewhat conservative.

In early July, the Center for Advanced Studies on Applied Economics (CEPA) revealed that Brazil’s poultry meat exports had experienced a significant turnaround in comparison with the start of the year. Brazilian poultry meat exports in June had beat all records measured both by volume and in local currency.

Overseas demand was so strong that product was diverted away from the home market, resulting in price rises for chicken meat in some regions of the country. Although by month-end, prices had fallen back somewhat, they were, nevertheless, forecast to regain an upward trend as July progressed.

This would suggest that that, overall, demand for broiler meat and consequently broiler poultry feed will strengthen. 

As long as Brazil remains free from avian influenza, and with more Brazilian chicken processing plants recently approved for export, the Brazilian feed industry could see its major client group upping the amount it purchases.

Layer feed

A similarly positive picture, however, is yet to emerge for Brazil’s egg producers. Sales of layer feed recorded a significant downturn during the start of the year.

In 2014, Brazil produced a record number of eggs. Yet by the end of year, production had started to contract, as the market struggled with oversupply. While Brazil exports only a small number of eggs, the sector experienced some difficulties in its few export markets, further exacerbating the problem of too many eggs on the home market.

Demand for layer feed fell by 11 percent over the first three months of this year to 1.25 million tons. Sindiracoes notes that not only was there oversupply, but that the price of eggs rose by 5 percent over the quarter while consumer demand was declining due to wider difficulties in the economy.

Sindiracoes notes that this weaker demand for layer feed reflects lower chick placings and a reduction in the size of the country’s laying flock.

Against this background, Sindiracoes forecasts that demand for poultry feed could reach 6.1 million tons by year-end.

Yet just as the country’s broiler producers have achieved a record month in international markets, there exists the possibility for the country’s egg producers to achieve something similar. Several countries, including the Netherlands and Mexico, have recently been approved to ship eggs to the U.S. in response to that country’s egg shortage. Similar approval for Brazil’s egg producers would help to absorb the current high production levels and boost the Brazilian feed industry. 

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