Cepea, May 17 2019 – The Brazilian exports of in natura beef have been at a fast pace since July 2018, having surpassed 100 thousand tons. In April/19, the volume shipped totaled 109.8 thousand tons, the largest for the month in all Secex series.
The good exports performance is linked to the firm demand from China and the higher competitiveness of the national beef in the international market – it is worth to mention that production costs in Brazil are lower than in other important beef-producing countries. Besides, a high exchange rate favors Brazilian sales to the international market – last month, the US dollar averaged 3.90 BRL, 1.56% higher than in March/19 and a staggering 14.4% up compared to that in April/18.
According to data from Secex, the volume exported in April/19 was 7.36% smaller than that from March/19, but 56.64% higher than that from April/18. Between January and April 2019, exports totaled 446.21 thousand tons, 15% more than in the same period of 2018 and only lower than the amount shipped in the four first months of 2007, when 455.04 thousand tons were exported.
Concerning the price of the in natura beef exported in April, it was the highest in the year, but still lower than that from the same month in both 2018 and 2017. According to data from Secex, the average exports price in April/19, of 3,785.53 USD per ton, was 1.74% higher than that from March/19, but 5.37% lower than that from April/18.
Revenue totaled 415.67 million USD in April, 5.74% lower than in March/19, but 48.25% higher than in April 2018. In Real, revenue totaled 1.62 billion, 4.3% lower than in March/19, but a staggering 70% up compared to that from April/18 (Secex).
BRAZILIAN MARKET – Although animal supply was not high in Brazil in the first fortnight of May, arroba quotes dropped, pressed down by the lower prices paid for smaller batches as well as the retraction of agents from slaughter facilities, which had previously bought larger amounts.
On the average of the fortnight, the ESALQ/[B]3 Index for fed cattle (São Paulo State, cash price) closed at 152.89 BRL, 2.8% lower than that from April. On the other hand, the ESALQ/BM&FBovespa Index for calf (Mato Grosso do Sul, Nelore, from 8 to 12 months old) increased in the first half of the month, averaging 1,295.48 BRL, 3.5% up compared to that from April.
In this scenario, the exchange ratio between fed cattle (weighing 17 arrobas, sold in the market of SP) and calf (purchased in Mato Grosso do Sul) is currently at 2.01 calves, 6% lower than in April, when a fed cattle was worth 2.14 calves. The current exchange ratio is the most unfavorable to backgrounding/finishing cattle farmers since July 2017, when a fed cattle was worth 1.89 calf, in real terms (values were deflated by the IGP-DI from April/19).
While the current fed cattle prices are low, due to purchasers’ pressure, calf quotes are rising, reflecting growers’ unwillingness to reduce asking prices. As pastures are in good conditions in many regions, some farmers have opted for keeping animals in the field, waiting for prices to rise more sharply. Besides, the vaccination period against foot-and-mouth disease also drove some growers away from the market in the first fortnight of May.
HOG – This year, two factors have been underpinning prices at higher levels than in 2018 in the Brazilian swine sector: a more balanced supply compared to that last year and higher demand from the international market. Besides pushing up pork meat quotes in the domestic market, this scenario is also boosting animal quotes (from piglets to animals ready for slaughter).
In western Santa Catarina, live pig quotes (delivered at slaughter facilities) averaged 3.89 BRL per kilo in the first fortnight of May, 32% up, in real terms, compared to that in the same period last year. In Erechim (RS), live pig quotes increased 34% in the same comparison, averaging 4.09 BRL per kilo in the first half of the month.
According to Cepea collaborators, pig supply was higher than demand, since some slaughter facilities are being restructured in Brazil and, thus, slaughter has been interrupted.
As for the pork meat market, in the wholesale market of the Greater São Paulo, the special pork carcass had a real valuation of 30.2% in the annual comparison (May/19 – May/18), averaging 6.59 BRL per kilo this month (values were deflated by the IPCA from April/19). For the common carcass, in the same comparison, prices rose 31.2%, to 6.34 BRL per kilo this month.
EXPORTS – The lower pork meat production in China, due to African Swine Fever (ASF) outbreaks, is sharply increasing Brazilian pork exports. According to data from Secex, in April, the amount of pork meat exported to China was the second largest in all Secex series, which started in 1997 – this volume was only smaller than that shipped in July/18.
From March to April, pork meat sales to China increased a staggering 22.3%, totaling 15.9 thousand tons last month. With this increase, China’s share in the total Brazilian exports of pork meat rose 4 percentage points (p.p.). Thus, while in March, China received 24% of the total pork meat exported by Brazil during the month, in April, that volume increased to 28%.
Besides the larger volume purchased, in April, China paid 11% more for the Brazilian pork. Considering frozen pork meat, which accounts for almost 100% of the Chinese purchases, the average price rose from 2.05 USD per kilo in March to 2.28 USD per kilo in April, the highest since April/18, when it reached 2.54 USD per kilo.
Considering all destinations, the Brazilian exports of pork meat increased 6% from March to April, totaling 57.5 thousand tons last month. Revenue from these shipments totaled 119 million USD, 12% more in the same comparison. The US dollar appreciation, in turn, increased the revenue in Real even more, to 464 million BRL in April, 14% up compared to that in the previous month.
The good exports performance last month was also linked to the larger amounts sold to Hong Kong and Uruguay. In April, Hong Kong imported 8% more pork meat from Brazil than it did in March: 13.9 thousand tons. In the same comparison, Brazilian sales to Uruguay grew a staggering 44%, to 4.4 thousand tons in April – with this volume, Uruguay was the third main destination for the Brazilian pork meat last month.
Exports to Russia, in turn, were the lowest since December/18, when the country resumed purchasing pork meat from Brazil, after the end of the ban imposed in December/17. From March to April, the Brazilian exports to Russia decreased a steep 39%, to 4 thousand tons last month.
POULTRY – Broiler meat – which is the most consumed animal protein in Brazil, since it is cheaper than its competitors are – has become more expensive. Still, from April to May (until May 15), pork meat prices increased more sharply than broiler did, which increased broiler meat competitiveness in the Brazilian market. Against beef, however, whose quotes have been stable, broiler competitiveness decreased.
In the wholesale market of the Greater São Paulo, chilled chicken quotes averaged 4.79 BRL per kilo in the first fortnight of May, the highest real level since November/16 (values were deflated by the IPCA from April/19). The average price in that period was 2% higher than that from April/19 and 41% up compared to that from May/18. The price rises are linked to lower production – compared to that from 2018 – as well as high exports.
The upward trend of broiler prices favors mainly exporters. For the agents that only trade in the Brazilian market, however, price rises are lowering liquidity. Since live chicken quotes are rising too, slaughter facilities have not been able to reduce broiler meat prices.
Thus, while in April pork meat was 1.73 Real per kilo more expensive than broiler, in the first half of May, the price gap widened to 1.80 Real per kilo, increasing broiler competitiveness by 3.9%. Against beef, however, broiler competitiveness decreased 0.67%, and the price gap narrowed from 6 Reais per kilo in April to 5.96 Reais per kilo in the first fortnight of May.
EXPORTS – From March to April, the Brazilian exports of in natura broiler meat decreased 2%. Still, the volume shipped last month was the largest for the period since 2016, when shipments totaled 378.5 thousand tons. According to data released by Secex, in April/19, Brazil exported 312 thousand tons of in natura broiler meat, only 5.2 thousand tons less than in March/19. Revenue from these shipments, in turn, totaled 1.9 billion BRL in April, 1% lower than in March, but a staggering 56% up compared to that in April/18.
The Brazilian poultry sector is aware of the African Swine Fever (ASF) outbreaks in China, where many sick animals are being killed. This scenario, in turn, is increasing Brazilian exports of other meat types, such as broiler meat, to meet part of the Chinese demand.