Cepea, January 4 2019 – CATTLE – The fed cattle sector awaited a better year than the previous, scenario that was observed indeed. New challenges faced by agents during 2018, however, led more optimistic players to be frustrated with the results obtained.
Record exports in the second semester and the need to purchase animal batches with different characteristics – to meet specific or urgent demands – pushed up fed cattle prices at some moments in 2018. This aspect highlighted the importance of operating internationally and in market niches. Specifically in the second part of the year, the low availability of animal batches from feedlots – given high production costs – was also responsible to boost quotes.
The profitability increase to fed cattle raisers and players from the industry, however, was limited by the domestic demand. The slow recovery of the Brazilian economy led the consumption rebound to be lower than the expected, resulting in an unfavorable scenario for price rises. Even in periods when consumption is likely to increase, players claimed that the demand was weak. At the end of the first semester, specifically, the combination of higher supply (due to lower exports) and the decrease in the industrial demand, because of the slaughter interruption, due to truckers’ strike in late May, was observed. This context pressed down fed cattle quotes significantly in June, when they dropped to 2018’s lowest average.
Considering the weekly averages of the ESALQ/BM&FBovespa Index for fed cattle (São Paulo State), the average in 2018 (until mid-December), in nominal terms, is 145.17 BRL, 4.42% up compared to that in 2017. In real terms (values deflated by the IGP-DI from November/18), the average in 2018, at 148.72 BRL, is 1.4% lower compared to that in the year before, at 150.83 BRL. This trend is also observed for calf and boned beef. The average of calf values in 2018, in nominal terms, was 1,184.15 BRL per animal, 2.63% more than in 2017. Considering real quotes, the average in 2018, at 1,214.73 BRL/head, is 2.97% lower than in 2017 (1,251.90 BRL/head). As for beef carcass, the increase in the same period is 1.23%, in nominal terms, changing from 9.76 to 9.88 BRL per kilo, but there is a 4.25% decrease in real terms, from 10.59 BRL to 10.14 BRL/kilo.
EXPORTS – The significant increase of shipments in the second semester was a result of more competitive prices and trade agreements.
From January to November, exports hit records in both volume and revenue (in BRL). The total shipped amounted 1.226 million tons, 11.3% more compared to the same period last year and 1.36% higher than the record observed up until then, in 2007, when 1.209 million tons were exported.
In the accumulated of the year (Jan-Nov), the revenue is the highest in all-times, totaling 5.111 billion USD, 10.61% up compared to that from the same period of 2017, but 3.26% lower than the record observed in 2014 (of 5.282 billion USD). In BRL, there is a record in the accumulated of the year, of 18.57 billion BRL, 25.51% more than in 2017.
HOG – After recovering in 2017, the swine sector resumed facing difficulties in 2018. Production costs with animal feeding (corn and soybean meal) increased, the Russian embargo limited pork exports and prices of the animal and the meat dropped. This unfavorable scenario led many producers to quit activities.
From January/18 to December 26 2018, the price average for corn in Campinas (São Paulo State) was 37.71 BRL per 60-kilo bag, 26% up compared to 2017, in real terms (values deflated by the IPCA from November/18). As for soybean meal, the increase was 30% in the same comparison, with an average of 1,275.87 BRL per ton in 2018.
Russia announced the embargo in December 2017, which lasted until October 2018, claiming that ractopamine was found in the Brazilian pork. The interruption of Russian purchases reduced significantly exports from Brazil, mainly in the first semester. According to data from Secex, between January/18 and November/18, the volume of pork shipped totaled 580.5 thousand tons, downing 8% in relation to the same period of 2017. The revenue amounted 3.9 billion BRL, 16% smaller compared to that received from January to November/17.
On the other hand, it is important to mention that the volume exported to other destinations increased, mainly because of cases of ASF (African Swine Fever) in some countries. Shipments to China from January to November/18, for instance, skyrocketed 250% compared to the same period in 2017.
Moreover, the swine production was increasing, scenario that ended up pushing up the domestic availability and pressing down quotes of the live animal and the meat. According to IBGE’s Quarterly Survey of Animal Slaughter, released on December 12, between January and September/18, 33.1 million animals were slaughtered, 3% more than in the three first quarters of 2017 and a record volume, considering all IBGE series, which started in 1997.
Between January and December 26 2018, special swine carcass traded in the Greater São Paulo averaged 5.55 BRL per kilo, downing 14% in relation to the same period in 2017, in real terms. The price average of the regular carcass was 5.26 BRL per kilo, 13% down in the same comparison.
Price drops for pork resulted in decreases of quotes for the live animal in all areas in Brazil. In the SP-5 region (Bragança Paulista, Campinas, Piracicaba, São Paulo and Sorocaba), from January to December/18, the average was 3.50 BRL/kilo, for a decrease of 15% compared to 2017, in real terms. In Minas Gerais, in the same period, values dropped 14%, averaging 3.95 BRL/kilo in 2018.
In June, however, the prices collected by Cepea rose significantly, due to the truckers’ strike in late May. In that period, the small number of ideal batches and the high demand pushed up values.
POULTRY – The year of 2018 was another challenging year for the Brazilian poultry sector. Price increases of important inputs, namely corn and soybean meal, and restrictions to the broiler from Brazil in the international scenario influenced the market. This context resulted in broiler price drops in Brazil, mainly in the first semester. In the second part of the year, broiler meat quotes moved up, due to the production decrease.
The significant price rises for corn and soybean meal from 2017 to 2018 (considering the period between January and November of both years) lowered the purchase power of the chicken growers from São Paulo by 15.3% against corn and by 17.6% against soybean meal in that period. Producers would be more affected if live chicken prices had not risen 3.2% in the Greater São Paulo, in real terms, from 2017 to 2018 (values were deflated by the IPCA from November/18).
However, the upward trend of quotes was limited to live chicken. In the SP region, comparing 2017 to 2018, in real terms, frozen broiler values dropped 3.6% and chilled broiler, 2.7%. This result is attributed to successive price drops from January to April – which, by the way, was one of the most critical for the poultry sector, given that the frozen broiler price average was the lowest in all Cepea series, which started in January 2004. As for chilled broiler, the price average in April/18 was the lowest in 12 years, in real terms.
One of the factors that led to this sharp price drop in April was the decision of the European Union to discredit some Brazilian slaughterhouses, given that the domestic market was not able to manage the higher availability. Aiming to change this scenario, the industry started to reduce supply, and prices increased in May. IBGE says that, from January to September/18, 4.3 billion animals were slaughtered, 3% less than in the same period of 2017.
In May, truckers’ strike brought uncertainties to the sector and trades were practically interrupted. After the end of the strike, the rebound of activities in slaughterhouses and purchases to supply the wholesale market was intense, and prices rose significantly. In the wholesale market of São Paulo, in June, both frozen and chilled broiler values rose 26% compared to May. In July, on the other hand, prices decreased, because supply and demand were adjusted.
In the following months, quotes were at higher levels compared to those observed during the first semester, which is a result of the lower supply and the good pace of exports from the middle of the year onwards.
In the first semester, the volume shipped was 13% smaller compared to the same period in 2017, with a monthly average of 300.1 thousand tons. In the second semester (until November), the average of exports increased to 365.1 thousand tons. From January to November, shipments decreased 7.5% in relation to those in the same period of 2017, according to Secex.
The performance of exports in 2018 was affected by changes of criteria regarding the halal slaughter. Saudi Arabia, one of the most important purchasers of the Brazilian broiler, reduced acquisitions by 20% until November.
On the other hand, China, a major destination for the national product, increased imports by 10% in 2018, indicating that the taxes imposed by the Chinese government in June to the Brazilian broiler had not brought major restrictions to trades. Moreover, Brazil was able to ship a bigger volume to countries such as South Korea, Chile and Mexico.