Brazil is closing the year with a tighter poultry and swine production, according to projections by the Brazilian Association of Animal Protein (ABPA). The information was presented at a press conference held on December 13, in São Paulo.
According to the study, poultry meat production will reach a total of 12.82 million metric tons (MT) in 2018, a volume 1.7 percent lower than the 13.05 million MT produced last year.
Exports are expected to reach a total of 4.1 million MT to close the year, a volume 5.1 percent below the 4.32 million MT exported in 2017. With a domestic supply of 8.73 million MT, per capita consumption of chicken meat looks to grow 0.63 percent, to reach 41.8 kilos in 2018.
Pork production is expected to show a contraction of 3.2 percent to reach 3.63 million MT. Production in 2017 was of 3.75 million MT. Shipments will reach a total of 640,000 MT, a volume 8 percent below the 697,000 MT exported in 2017.
Facing a domestic supply of 3.07 million units, per capita pork consumption will be around 14.35 kilos this year, 2.6 percent less than consumption in 2017.
On the positive side, it is predicted that egg production will show an increase of up to 10 percent in 2018, compared to the 39,900 million eggs produced in 2017, to reach 44,200 million eggs. Egg exports will exceed 10,800 MT, a growth rate of 80 percent above what was done last year.
Per capita consumption of eggs is reaching the historic mark of 212 units, exceeding by 10.4 percent the rate recorded last year.
Exports from January to November 2018
Total exports of chicken meat in the first eleven months of the year amounted to 3.748 million MT, 6.3 percent lower compared to the 3.999 million MT shipped between January and November 2017. Sales of chicken meat generated revenues of US$5.990 billion in the period, a balance 10.8 percent lower compared to US$6.712 billion last year.
Total pork shipments reached 589,200 MT in 2018, 8.4 percent less compared to the 643,500 tons shipped between January and November 2017. The balance in revenue in the period is of US$1.105 billion, 26.8 percent lower than in the first 11 months of 2017 of $ 1.509 billion.
In the case of eggs, exports totaled 9,991 MT, a volume 83.9 percent higher than the 5,434 MT shipped in the same period of 2017. In revenue, sales reached US$15.1 million, 101.9 percent above the $ 7.4 million made between January and November 2017.
Relevant factors of the year
According to the president of the ABPA, Francisco Turra, among the positive factors that occurred throughout 2018 were the 26 new plants enabled to export chicken meat to Mexico, the viability of the Cambodian market for the Brazilian poultry sector and the opening of the South Korea and India markets for pork. After 11 months of negotiations, Russia also reopened its market for the swine sector.
Another important issue of 2018, according to Turra, is the current health crisis in China. "The historical mortality of animals in the largest pork producer of the world will increase the demand for meat from countries that supply the Chinese market today. Market information indicates that there is a gap of about 4 million MT (according to information gathered by Asia Agro Alliance Consulting) as a direct impact of outbreaks of African swine fever,” he explained.
In China, according to the executive director of ABPA, Ricardo Santin, are in the final stage negotiations between Chinese and Brazilians for the Price Undertaking (PU) agreement for Brazilian exports of chicken meat, which must halt interim dumping tariff duties applied by China. "Companies delivered the PU proposals to the Ministry of Commerce this week. Important factor: even with the application of tariffs, exports of chicken meat to China closed the year 10 percent above those in 2017,” he stressed.
This year, also relevant are factors such as the delisting of 20 plants (although eight are still exporting raw chicken meat without added salt) by the European Union, and the modification of the slaughtering criteria for importing poultry by Saudi Arabia. In the latter case, according to Santin, changes in the market readjustment resulted in a shrinkage exceeding 100,000 tons in Brazilian exports, one of the most reduced import markets in 2018.
Among the relevant factors of the year is also the 10-day strike on Brazilian roads, with truckers strike. Millions of birds have died during the 10-day strike. The impact exceeded R$3,100 million, of which R$1,500 million were unrecoverable. In addition to the losses, the strike brought to light the freight rate table.
Due to health issues, poultry, eggs and swine sectors depend on so-called dedicated transports, which are customer loyal and do short distances. With the new table, the cost of logistics of the sectors, in general, show an average increase of 35 percent, to reach about 80 percent in some cases, such as transportation of feed.
As for production costs, prices of corn and soybean meal, which represent up to 70 percent of production costs, were the main factors of influence. Compared with 2017 data, the price of corn was up to 50 percent higher and soybean meal up to 40 percent.
"The price of inputs within the domestic market boosted business with grain producers from neighboring countries, like Argentina and Paraguay. Products supply forecasts for 2019 point to a year with lower production costs compared with the previous year,“ said Turra.
In this context, it is noteworthy that the change was favorable to Brazilian exports, especially during the second half of the year. "Considering factors such as production costs and international prices of products, the relationship dollar-real is favorable to the productive sector at levels above BTRL3.50," said Santin.
Expectations for 2019
According to the ABPA, the broiler breeder supply 2018 indicates a moderate supply of chicken meat in 2019. The expectation is that the production rate for next year will be 1.39 percent higher, to reach a production of 13.2 million tons.
As for pork, the market will be influenced by the expectation of raising international product demand, especially from China (with reduced production centers, due to outbreaks of African swine fever) and Russia (recently reopened for Brazil). Projections point to a production rate next year of 1.39 percent to reach a production of 13.2 million tons.
There is also a great expectation regarding the new government, said Turra. In late November, the ABPA presented the Transition Group of the future Presidency of the Republic, a document with requests pf the poultry and swine producers. Among the items covered in the document was the elimination of bureaucratization in the process of enabling processing plants, the ending of the establishment of a minimum freight; improving logistics infrastructure, strengthening highway safety against cargo theft and implementation of international agreements.
ABPA will also define new working strategies for next year. This month, the association began the 500K Project, a strategic plan together with exporting companies and consulting of EY. The aim is to strengthen performance in strategic markets for the sector, with the goal of achieving an average volume of exports of poultry and pigs of about 500,000 MT per month.
