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Brazilian Beef Sector Expected to Remain Firm in 2015

19 January 2015

BRAZIL - Despite the uncertain and challenging macroeconomic scenario, prices are expected to remain firm in the Brazilian fed cattle market.

The still limited supply for calve, lean and fed cattle might continue to underpin values, according to the Brazilian market analysts, Cepea.

The growing international demand and the smaller slaughter of female animals reinforced the situation of underpinned levels reached in 2014.

The lack of rains since 2013 have affected not only the fattening of animal, but also the pregnancy rate, the interval between births and the development of calves, as well as pushing up the mortality rate.

As a result, the number of animals being sent to slaughter and the carcase weights have fallen.

Even if rain return regularly in 2015, significant increases in the supply of calve, lean cattle and slaughter-ready animals are not expected over the coming year.

As for the demand, a fall in aggregated sales to Brazilian consumers compared to the last year is not anticpated, although high quotes are holding back consumption, mainly in a year when the economic activity might be slow.

Projections indicate a slight increase of the Brazilian GDP, below one per cent.

The new economic team in the government in Brazil has been received with optimism in the market.

As for exports, the prospects are more positive, especially with regard to the value of the dollar against the real.

Abiec (Brazilian Meat Exporting Industry Association) estimates that the revenue obtained with free range and industrialised beef sales to the international market might reach $8 billion in 2015, with 1.7 million tonnes exported.

In 2014, the revenue is expected to have hit $7.28 billion, which would be a record and exports are expected to have seen an increase of 8.6 per cent compared to 2013 when they reached $6.7 billion dollars.

Problems faced by major international producers and the continued uncertainty between Russia and some countries in the international community might favour international sales of Brazilian beef.

The sector is expecting an increase in consumption of meat in China and in the Middle-East.

Japan is also looking at the possibility of opening up the market to Brazilian beef shipments.

Despite expectations of continued high prices in 2015, how this will affect cattle farmers will depend on costs, which might be influenced by adjustments in the minimum wage and the price of imported raw materials.

On the other hand, oil price drops in the international market might bring a relief, the Cepea analysts said.

For cattle farmers to make a profit, producers, who bought calves at record prices in 2014 will need to produce fed cattle efficiently over the coming years and need to hope that cattle prices remain firm.

As for the pig sector, after a year of recovery, the Brazilian sector has high hopes for 2015, based mainly on the international market and the supply adjusted to demand.

Domestic consumption might continue to be firm, but there are forecasts that the Brazilian economy might weaken.

In this case, players need to act carefully and plan activities to keep the chain sustained.

As for the international market, Ceopea said that Brazil will have to look for new consumer markets, reducing the dependency on Russia.

There are continued sanitation problems in the major pork consuming countries of the Northern Hemisphere that are Brazil’s competitors in the international market and this could work in Brazil’s favour.

The Brazilian poultry market expects a higher balance between supply and demand in 2015, which might result in slightly higher prices compared to 2014.

Players say that the continued high beef quotes might encourage Brazilians to increase the broiler consumption.

Meanwhile, exports, which account for about 30 per cent of the national production, might continue to benefit Brazil, especially when the dollar-real valuation is taken into account.

TheMeatSite News Desk

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