Strong financial speculation on commodities futures markets, from energy to grains, coupled with a shortage of feedstuffs under growing global demand, brings challenges to the feed business worldwide. Brazil is no exception.
Brazilian feed entrepreneurs used to deal with a clear scenario until the middle of 2007. But since then, they have been surprised by a gloomy and unbalanced situation.
Earlier this year, Brazil's Feed Industry Association CEO Dr Ariovaldo Zanni shared his thoughts with Feed International and looked ahead to the challenges that confront what has been a growing and robust industry in Brazil. "The Brazilian Feed Industry Association is aware that this is the end of the cheap food age and believes every stakeholder needs to rethink the food chain," Zanni said.
According to Zanni, Brazil has been facing a multitude of extraordinary factors, including the grain stocks shrinkage, human and economic growth, land and water shortage for agriculture practices, ethanol and feed competition for corn, and strong impact of climatic disorders, amongst others.
He said there is an unbalanced ratio between offerings, and demands of fertilisers and phosphates because manufacturers have not invested in new plants whereas global agriculture has improved rapidly.
"This situation is expected to be resolved within three to four years. Meanwhile, both crop yield and livestock performance may get jeopardised and commodity prices will remain above historical levels," Zanni said.
Brazil's feed industry has faced its share of restructuring, consolidations and acquisitions in recent years. In June, EVIALIS confirmed its acquisition of Cargill Animal Nutrition's business in Brazil, including its entire PURINA brand range. The acquisition allowed EVIALIS to become the market leader in the animal nutrition sector in Brazil and the third largest worldwide.
Like its neighbours to the north, Brazil saw a depression in livestock prices in September as more than the normal amount of cattle hit the market amid climbing feed costs. But after almost one month of decline, Brazilian cattle feed prices rose again in October. The supply of animals from feedlots began to drop.
In the wholesale market, steer carcass prices also rose, reaching the highest nominal value registered by Cepea, of 5.70 reals or US$2.99 per kilogram on September 30th.
For calves, on the other hand, prices accumulated a decrease of 2.2% in Real, according to the ESALQ/BM&F Index (Mato Grosso do Sul state).
"Additionally, the Brazilian feed industry is quite dependant on external supply. For this reason, we've fostered the government, as well as other domestic and transactional entrepreneurs, to implement a study plan for production of nutritional additives within the Brazilian territory," Zanni said.
During 2007, Brazil's feed sector imported almost US$900 million in vitamins, amino acids and other additives to produce more than 54 million metric tons of livestock feed and pet food. The industry is expected to produce 59 million metric tons of feed and another 2 million metric tons of mineral salts. It will spend more than US$1.2 billion importing additives.
The Brazilian feed industry has faced other challenges in the past, such as some resistance over GMO issues, and the overhead taxes on feedstuffs. However, the feed industry has managed alternative actions in order to cope under a new scenario of higher costs of corn, soya bean meal and additives and to remain growing over 10% during 2008. The forecast for 2008 has been to move almost U$20 billion in raw materials.