Mato Grosso and the neighbouring Brazilian states of Mato Grosso do Sul and Goiás form a region that is often called Brazil's Midwest because it is a major grain-growing area in the centre-west of the country. The region is vast. At 1.6 million square kilometres, it covers a land area that is about 38% bigger than the total area of the 8 states in the US Midwest.

Unlike those American midwestern cornbelt states, however, it has opened up for agriculture only quite recently. Some parts are at the start of agricultural development even today although that is changing fast. New farming projects have arrived, not least to extend the reach of integrations in pork.

Target zone

The eyes of the integrators are particularly on Mato Grosso. Representing about 56% of the land area in the Brazilian Midwest, it is more remote than its neighbours and has suffered in the past from the lack of a transport infrastructure for bringing in inputs and carrying grains either to the domestic market or to the coast for export. This added to producers´ costs and reduced their returns. Under these conditions it is logical to transform the grain crops into meat locally and send the higher-value, lower-volume meat products to the national and international markets. That is beginning to happen. With its production of soybeans and corn increasing due to more area planted and ever-higher productivity, Mato Grosso is poised to become a major producer of animal protein, particularly pork and poultry.

Mato Grosso is abbreviated locally as MT whereas Mato Grosso do Sul is MS and Goiás is GO. An expansion of meat production especially in MT has been predicted for a long time. It was held back before by the difficulty of logistics and also by animal health considerations, particularly foot-and-mouth disease. The difference now is that the transport infrastructure is improving, even if only slowly, and there have been improvements in the region's animal health status following the imposition of better government controls over vaccination campaigns and animal movements.

As a result, Mato Grosso today is seeing large investments in livestock production and processing to meet the growing international demand for meat. Both of the Brazilian meat giants, Sadia and Perdigão, are putting up pork and poultry plants in the state. Foreign investors have also moved in, with money to persuade people to create feedlots for beef cattle.

Sadia has a project in Lucas do Rio Verde, about 410 kilometres north of Cuiabá, to build a plant for slaughtering 5000 pigs/day. This implies that the company will have about 60 000 sows in production in the surrounding area. Another example relates to a southern Brazilian meat integrator called Alibem that is already slaughtering pigs in Rondonópolis and intends to expand production there, initially to 2000 pigs/day and then to 6000 pigs daily.

Switch to integrated production

It is clear that MT will be a huge producer of meats in the future. Most probably, much of its production will be integrated. This is noteworthy because pig producers in Mato Grosso have remained fairly independent so far, in contrast to the trend in southern parts of the country. But Sadia and other big integrators are known to be arriving with proposals to make to those who already have farms in the state and to others who want to start a pig or poultry enterprise.

A measure of the interest this has stirred up is that the Mato Grosso Pig Association arranged a meeting recently in Cuiabá at which one of the principal topics was systems of integration, or what the Brazilians themselves often refer to as ‘partnership systems'. The MT producers wanted to know more about how these partnership deals work in the south. A commentary last month in Pig International gave a European view in favour of integration. From talking to several operators of integrated pig units in southern Brazil, it seems about the only remaining positive factor for the independent producer is the dream of achieving high profits some time in the future! Little else has sustained independent pig producers in Brazil over the last few years.

The large integrators in the south now control production of about 80% of total pigs slaughtered, on average. Some already produce 100% of their needs; they dip into the pig market only occasionally to cover a temporary shortfall in their daily supply. Moreover, most of the 20% of pigs produced by independents have informal marketing arrangements with a local meat plant. With this shrinking market for independent pigs, prices have become increasingly volatile. Extended periods of losses have happened over recent years and at times there can be a great difficulty in finding a buyer for both weaners and finished pigs.

It is difficult, after decades of independent production, to give up that status and become virtually an employee of a big company. This is an emotional point and hard to overcome. For many producers who have taken the path of integration, however, the impossibility of sustaining losses has convinced them that the pig industry has changed for all time and their attitudes must change with it.

The driving force behind partnership production in Brazil, as argued by the meat companies, is the growing demand for traceability. It is a demand factor associated particularly with international buyers, but to an increasing extent it can also be seen within Brazil. Most countries require that imported meat products conform to their national standards, in terms of production methods, animal management and welfare, drug use, environmental considerations and the origin and quality of feed materials.

Sadia and other large meat companies seem to have decided that it is only through a ‘total partnership' approach that they can control all the variables and satisfy the diverse requirements. This in turn, of course, completely changes the structure of how pigs are farmed as the producers of Mato Grosso are about to discover.PIGI