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Andrea Gantz
on June 2, 2016

Brazil’s corn woes could mean less poultry, pork exports

With domestic corn supplies hard to source and expensive, some in the Brazilian poultry and pig sectors are being forced to cut back on production.

Recent drought has dramatically pushed down forecasts for this year’s corn harvest in Brazil.

The latest report from the International Grains Council (IGC) forecasts the current year’s crop at 78.5 million metric tons (mmt) – well below the figures of 80.1 mmt and 84.7 mmt for 2014-15 and 2015-16, respectively. Animal feed is way ahead as the major user of corn in Brazil, and IGC estimates an increasing use for that purpose in the current year to 45.7 mmt, up from 45.2 mmt last year.

This development goes against the overall global trend for corn production this year, which IGC has forecast to increase to just over 1 billion metric tons this year.

“This corn scarcity was the surprise of the year,” Francisco Turra, president of Brazil’s chicken and pork exporters group (ABPA) told Bloomberg in a recent interview. “The supply outlook had a major deterioration in the past months.”

Chicken output forecast down

According to Turra, Brazilian chicken output will be down by 10 percent over the next 3 months, with poultry meat producers large and small being forced to cut back output by closing plants, reducing work shifts or forcing employees to take vacation. The situation is not helped by Brazil’s political and economic difficulties, which have caused domestic demand for poultry meat to stagnate.

Domestic prices for corn are heading for double what they were last year. Figures from the latest report from the National Food Supply Agency (Conab) put the price for 60 kg of corn at BRL52-55 (US$14.50-15.32), depending on the region. A year ago, the figure was BRL28-34 (US$7.80-9.47).

The government has suspended import tariffs to help poultry and livestock farmers source supplies from other countries, according to Bloomberg.

Turra said poultry meat processors are increasing grain purchases from Argentina and Paraguay. IGC forecasts Brazilian corn imports at 1.5 mmt this year – five times the estimated level for 2015-16.

Grain problems for pig producers

Cost and logistics of grain transportation within Brazil are additional challenges facing the country’s poultry and pig producers, reports Globo Rural, especially those in states such as Santa Caterina, which are far from the corn-growing states. Pig and poultry feeds are based on corn and so rising prices have a big impact on the total costs of production.

One pig producer described how Conab is rationing the supply of corn to the state’s farmers so that each receives the same amount each month. For larger producers, the ration does not even cover one day’s requirements.

It is reported that government stocks are gradually being released. However, the Ministry of Agriculture considers the amount in storage to be low so the shortage of corn in Brazil cannot easily be solved using local stores. Farmers blame the delays on excessive bureaucracy.

Even Brazil’s largest meat companies are affected by the corn shortage.

“The first quarter of the year was one of the most challenging periods of the last decade, due to a combination of very distinct events,” said Pedro Faria, Global CEO of BRF, commenting on the company’s first-quarter results recently. “While chicken production in Brazil reached record levels, pressuring prices, the cost of corn [in Brazil] has risen exponentially – and without any correlation to global prices – with an increase of more than 30 percent compared to the end of 2015.”

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