The U.S. poultry industry is in its fifth year of profitability, while the Brazilian poultry industry is upside down with high feed costs and liquidity woes.
The Brazilian real and corn production are down, but this is just part of the economic squeeze on Brazilian poultry producers, said Dr. Paul Aho at the USA Poultry & Egg Export Council annual meeting earlier this year. The pinch on the Brazilians, he said, is completed by the country’s switch from being an exporter to an importer of corn.
The Brazilian poultry industry’s former advantage as a corn exporter worked like this: “Let’s say you’re a small corn producer in the center of Brazil. Your corn price will be, Rotterdam, minus transportation, minus all of the things that go on in the port at Brazil, minus the trucking cost back to your farm in central Brazil, and you end up with a very low price of corn, and chicken producers have a bargain.”
It is a harder reality, Aho said, for Brazil today as a corn importer: “You take the New Orleans price of corn, you add transportation costs to the port in Brazil, you add the cost of getting through the port, then you add the cost of getting that truck into the center of Brazil, and all of a sudden you’ve got seven dollar a bushel corn.”
Rabobank’s senior analyst for animal proteins said at the same meeting that the liquidity of Brazilian poultry producers has become an issue.
“We’re seeing interest from Asian and European poultry producers in finding opportunity for acquisitions. The second tier of the Brazilian poultry market is going to change significantly over the next 12 months,” said Will Sawyer of Rabobank.
Reflecting on the topsy-turvy economics on the American continents, Aho said, “The storm has passed from the U.S. to Brazil.”
Sawyer went on to point out a different silver lining for North American poultry producers: The current valuation of the Mexican peso sets up not just opportunities for U.S. exports of animal proteins there but the Mexican poultry industry’s opportunity to take advantage of further processing opportunities.