CATTLE: Exchange ratio for corn is the worst in almost five years

Cepea, May 3, 2021


April was the most unfavorable month to Brazilian cattle farmers regarding corn purchases since June 2016. Not even the cattle valuations observed during the month were able to improve the exchange ratio for the cereal, since corn prices increased more sharply in April.


Brazilian cattle farmers have recently increased the amount of grains in the diet of the animals, due to the beginning of the dry season.


Considering the CEPEA/B3 Index for fed cattle (São Paulo State) and the ESALQ/BM&FBovespa Index for corn (Campinas, SP), the exchange ratio between fed cattle and corn has increased by 5.83% this year (Jan. – Apr.), taking into consideration average real prices deflated by the IGP-DI from March/21.


In early 2021, a kilogram of fed cattle was worth 13.82 kilograms of corn, while in April, a kilo of the animal was worth 13 kilos of the cereal. In April 2020, Brazilian cattle farmers were able to purchase 15.08 kilos of corn by selling a kilo of fed cattle, which means that the current exchange ratio is 13.73% higher. In June 2016, a kilo of fed cattle was worth 12.75 kilos of corn.


According to Cepea researchers, the upward trend of corn prices reflects the low supply in the Brazilian spot market and the firm demand from both the domestic and the international markets. The delay of sowing and irregular rains increased sellers’ uncertainties about the productivity of second crops, which is keeping these agents away from the market. It is worth to mention that corn prices have been at record levels (in real terms) in many Brazilian regions.


From December 30, 2020 to April 30, 2021, corn prices rose by 26.8%. In the same comparison, fed cattle prices increased by 17.1%.


HOG: Live hog prices rise in April and return to level from Nov/20


Prices for live hog and pork meat increased in all the Brazilian regions surveyed by Cepea in April, majorly in the southeastern region of the country. Besides the fast exports pace, the colder weather – which favor pork meat consumption –, the emergency aid and expectations for relaxing the restrictive measures related to covid-19 also favored sales. With the valuations, live hog prices returned to the levels from November 2020 in some regions, and quotes for pork meat, to the levels from January/21.


The upward trend of quotes favored the purchase power of hog farmers against soybean meal, whose prices are currently fading. On the other hand, against corn, the scenario is still unfavorable, since corn prices have been rising more sharply than that for live hog in the Brazilian market.


The average price for live hog in April closed at 7.25 BRL/kg in the SP-5 region (Bragança Paulista, Campinas, Piracicaba, São Paulo and Sorocaba), 6.7% up from that in March/21. The boost came from the fast exports pace for the national pork meat and the consumption increase in the domestic market.


In the market of soybean meal, despite the valuations registered late in the month – due to the high price levels for soybean in Brazil and the firm demand from both the domestic and the international markets –, the average price for the by-product in April is 5.2% lower than that in March, at 2,495.25 BRL/ton in Campinas (SP).


As regards corn, the average of the ESALQ/BM&FBovespa Index (Campinas, SP) closed at 97.15 BRL per 60-kilo bag in April, 6.1% higher than that in March. According to data from Cepea, the upward trend of corn prices is linked to the current low supply and firm demand from both the domestic and the international markets. Besides, the delay of sowing added to irregular rains increased uncertainties about the productivity of second crops, which helped to push up prices to record levels (in real terms) in many Brazilian regions.


POULTRY: Competitiveness of chicken meat increases in April


Despite the valuations late in the month, the average prices for chicken meat in April were lower than that in March. On the other hand, for beef and pork meat, the averages were higher last month. This scenario widened the price gap between chicken meat and the other two types of meat, ensuring good competitiveness against pork meat and setting a record against beef.


In the wholesale market of the Greater São Paulo, sales of whole chilled chicken increased in the second fortnight of April, however, liquidity and prices were low earlier in the month. Thus, purchasers are trying not to build high inventories, uncertain about the effects of the covid-19 pandemic on sales in the coming weeks.


In the market of beef, quotes have been underpinned by the low supply of fed cattle ready for slaughter and the fast exports pace for the Brazilian beef, factors that are keeping beef supply low in the domestic market.


As regards pork carcass, lower temperatures, which favor pork meat consumption, the fast exports pace for the Brazilian pork meat and high production pushed up pork prices in Brazil in April.




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