Brazil’s poultry production and poultry meat exports are expected to end 2018 lower after, according to the sector’s industry association ABPA, “one of the most critical moments in history.”
ABPA forecasts released in late August suggest that production of chicken meat will end the year 1-2 percent lower while Brazilian chicken meat exports are expected to shrink by 2-3 percent, after 2017’s 1.4 percent reduction.
Brazilian poultry producers have faced ongoing difficulties in home and overseas markets this year.
Despite numerous companies entering 2018 in a far-from-favorable position, there were hopes at the very start of the year that 2018 would be more positive than 2017. This optimism, however, was short lived: Exports, which absorb one-third of production, were down by the end of the first quarter by volume and by value, despite a re-opening of many temporarily closed markets.
There was little improvement as the year progressed. Partway through the second quarter, the industry had to contend with a strike by truck drivers. ABPA notes that the poultry and pig industries paid a particularly high price as a result of the action. Millions of birds are reported to have died due to feed not reaching farms and 167 processing plants were unable to function. Losses are thought to have exceeded BRL$3 billion (US$722 million).
The disruption caused by the strike continues to be felt, ABPA reports and, as the final quarter of year approached, there was talk of new strike action in the freight sector.
Newly introduced minimum charges for transport have seen transport costs for the sector rise by an average of 35 percent but, in some cases, increases have reached 35 percent, for example in the transport of feed.
Declining profitability
But it is not only rising transport costs that are hitting Brazilian producers this year; rising feed costs have also been hitting profitability.
Corn prices have risen by 53 percent in comparison with 2017, while those of soy have been 43 percent higher. These cost increases have been the result not only of poor harvests but also due to imports of feed grains at unfavorable exchange rates and rising shipping costs.
Given loss of export markets, declining margins and losses, Brazil’s broiler producers are placing fewer chicks. Estimates suggest placings are down by 3-5 percent. ABPA warns that, given its members’ higher costs, consumer prices on the home market for chicken could be some 15 percent higher, but per capita chicken meat consumption in Brazil this year is expected to contract slightly, calling into question whether these increases can be fully passed on to consumers.
2018 is expected to end with the industry producing approximately 13 million tons of meat, 1-2 percent below 2017’s total and significantly below the forecast 2-4 percent expansion made at the beginning of the year.
Brazilian production of poultry meat is forecast to end the year lower, with the last months of 2018 showing little chance of making up for difficulties over the first half.
Chicken exports
Brazil entered 2018 with a degree of optimism with the worst of the Weak Flesh Scandal thought to be behind it, and the re-opening of markets that had closed in response to reports of poor practice. However, that optimism was short lived.
Between January and July, the country exported 2.3 million tons of chicken meat, 8.2 percent below the volume of meat exported over the same period in 2017.
Concerns over Salmonella saw the European Union delist numerous chicken exporting slaughterhouses, and exports to the EU contracted by 30 percent over the first seven months of this year.
But Europe has not been the only source of difficulty for Brazilian exporters this year, which have also had to cope with new halal criteria in the Middle East. Shipments to the Middle East contracted by 10 percent over the period.
Sales to China have been hit by the anti-dumping measures introduced late last year, but despite this difficulty, exports to Asia as a whole rose slightly. Other bright spots this year have included shipments to the Americas, which rose by 9 percent. ABPA notes that it was the diversity of export markets enjoyed by its members that saved the export situation from being much worse.
Figures for July suggested that this difficult period for the industry in export markets may have been coming to an end, with overseas sales rising to 463,000 tons, an increase of 20 percent. This was the highest-ever single monthly increase on record, and prompted ABPA to predict that August would continue strong with exports of more than 400,000 tons. This, however, failed to materialize, and August ended with the sector exporting 396,900 tons and revenues contracting by 7.9 percent compared with August 2017, suggesting that any recovery in the losses made during the beginning of the year will be hard to recover.
Egg sector bright spot
While the country’s poultry meat sector may have been suffering, Brazil’s egg producers have been enjoying much better fortunes.
Egg production is forecast to expand by 10 percent this year, reaching 44.2 billion units.
Per capita egg consumption in the country is estimated at 212 this year, up from 192 in 2017.
But it is not simply in its home market that demand for Brazilian eggs is rising -- demand is also rising from export markets.
Over the first seven months of this year, the country exported 5,800 tons of eggs, an increase of 59 percent, with a value 84 percent higher than that recorded in 2017.
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