Economic crisis, slowdown of businesses, factory closures and unemployment: The Brazilian outlook of the first half of 2016 ravaged almost all of the South American country’s productive sectors. With the expansion of unemployment in the country, consumption levels were negatively impacted.

In this context, over the first six months of this year, producers and exporters of animal protein saw the price of corn jump and reach levels higher than BRL60/sack (USD 18.45). Now, with the second corn crop and slight "break" in grain prices, it is soy’s turn to put its "weight" on costs and competitiveness of poultry and swine producers in Brazil.

To add to these unfavorable factors, the fall of the exchange rate at BRL3.30 per U.S. dollar levels gives a squeeze to industry margins. Recently, the Associação Brasileira de Proteína Animal (ABPA), had expressed concern regarding the importance of the exchange rate at BRL3.50, to maintain export competitiveness of exporting agriculture.

It was an almost a perfect storm. Companies announced discontinuation of shifts. Other units closed or suspended leases. Despite this, the sector has strained to avoid layoffs.

In face of this context, the ABPA, through its periodic analysis along with associated members, has followed a significant reduction in levels of chick placements. If these levels continue, expectations are that production volumes will fall to about 13 million metric tons, 4 percent less in relation to the initial expectations of the year, which was 13.5 million MT.

Something encouraging in this scenario is the increase in exports. The new ABPA projections indicate poultry meat volumes shipped will grow 8 percent this year compared with total exports in 2015. There are great expectations of maintaining sales to China (consolidated as the second largest importer of Brazilian chicken meat), plus the pace of shipments to the Middle East and other Asian countries, such as Japan and South Korea.

Chicken meat exports

Shipments of chicken meat (fresh and processed products) reached the 411,900 metric ton (MT) level in June, 4.1 percent higher than in the same period last year.

Good performance in June helped the sector to close the first half of 2016 with exports 13.86 percent higher than the first six months of 2015. Overall, this year 2.266 million MT were shipped, about 276,000 MT more compared with the previous year.

In foreign exchange earnings, the balance of the semester recorded a contraction of 1.25 percent, with a total of US$3.384 billion. In June, the decline was of 3.5 percent, with US$661.7 million.

At a different pace, the results of shipments in reals showed positive results, with an increase of 6.2 percent in June (with BRL2.265 billion) and 21.72 percent in the first half 2016 (with BRL12.442 billion).

The 15 largest importers of Brazilian poultry meat in the first half of 2016

  Country

Jan– Jun 16

Share

1.

Saudi Arabia

379,764,833

17.0%

2.

China

256,417,859

11.5%

3.

Japan

215,142,311

9.7%

4.

European Union

200,314,651

9.0%

5.

United Arab Emirates

159,216,306

7.1%

6.

Hong Kong

124,231,187

5.6%

7.

South Africa

123,118,945

5.5%

8.

Kuwait

64,459,919

2.9%

9.

Egypt

54,069,178

2.4%

10.

South Korea

47,544,684

2.1%

11.

Russia

47,287,174

2.1%

12.

Singapore

43,407,772

1.9%

13.

Oman

41,049,873

1.8%

14.

Qatar

39,628,802

1.8%

15.

Mexico

33,535,891

1.5%

 

Other

399,122,402

17.9%

 

Total

2,228,311,787

 

Egg exports

Brazilian egg exports totaled 528 MT in June, 21.9 percent less than the total shipped by the sector in the same month of 2015. In the first half of 2016, the sector accumulated an increase of 6.8 percent, with 7,487 MT exported.

In foreign exchange, the sector accumulates an increase of 8.8 percent in the year, with US$10 million in the first half of 2016. Meanwhile, in June there was a fall of 16.8 percent, with a balance of US$798,000.

In performance in reals, there was an increase of 44.4 percent in the total obtained by the sector in the first six months of this year compared with the previous year, with BRL 38.2 million. However, in June there was a drop of 8.4 percent, with BRL2.7 million.