Cepea, July 2, 2020 – CATTLE – After hitting record real levels at the end of 2019, prices for fed cattle and beef remained firm along the first semester of 2020, underpinned by the low fed cattle supply in the Brazilian market. Higher female slaughter between 2018 and 2019 limited the number of animals finished in 2020 – it is worth to mention that the cattle volume slaughtered in Brazil in the first quarter of 2020 was the lowest since 2011, according to data from IBGE.
Besides, the fast exports pace for the Brazilian beef underpinned the domestic prices for fed cattle arroba and beef. Shipments were crucial for the Brazilian cattle sector, mainly in the second quarter of 2020, when the domestic demand started to weaken, reflecting the crisis related to the coronavirus pandemic.
FED CATTLE – In December/19, the CEPEA/B3 Index for fed cattle averaged 218.08 BRL, a record in all Cepea series, in real terms (values were deflated by the IGP-DI); in the first semester of 2020, the Index remained at around 200.00 BRL. In June/2020, the Index averaged 209.87 BRL, the third highest in the series, which started in 1994, only after that in November/19 and in December/19.
BEEF – For the beef carcass traded in the wholesale market of the Greater São Paulo, the average price in December closed at 15.24 BRL/kg, also a record in the series of this product, which started in 2001. In the first semester of 2020, beef prices remained at around 14.00 BRL/kg, averaging 14.07 BRL/kg in June.
PRICE GAP BETWEEN FED CATTLE AND BEEF – In June, beef prices were higher than prices for fed cattle ready for slaughter, which, in general, has been observed since late 2016. However, the price gap between these products narrowed considerably during the month. This shows that fed cattle prices have been rising more sharply than beef prices, which, in turn, may be linked to the recent decrease in the domestic demand for beef, due to the lower purchase power of consumers, who may be searching for cheaper animal proteins.
In June, the price gap between fed cattle arroba and beef carcass was only 1.18 Real per arroba, with beef still more expensive in the wholesale market. That is the narrowest price gap observed since August 2018, when it was slightly negative, by 0.4 Real/arroba, meaning that fed cattle arroba was more expensive than beef. As a comparison, in June 2019, that price gap was at 10.24 Reais/arroba, with beef more expensive in the wholesale market.
CALF – As result of the higher female slaughter in the last two years (2018 and 2019) and higher heifer slaughter, real calf prices were at record levels (in real terms) in the first half of 2020. This scenario underpinned farmers’ revenue, since the prices of imported inputs were high too (because of the strong dollar) as well as corn and soybean meal quotes.
Thus, the average calf price (Nellore, from 8 to 12 months old) in São Paulo State, which was at 1,676.33 BRL per animal in December/19, in real terms, was around 1,900.00 BRL in the first half of 2020. In June, calf prices averaged 1,989.01 BRL – the real record in the series, at 1,994.43 BRL, was observed in May 2020.
EXPORTS – Brazilian exports were favored by the strong dollar in the first semester of 2020, which increased the competitiveness of the national beef in the international market (there were only a few sellers abroad). Moreover, there were covid-19 cases in some countries added to animal health issues, such as African swine fever (ASF) outbreaks, bird flu and foot-and-mouth disease. So far, shipments have been a record for a first semester.
HOG – Prices for all hog products (from live hog to pork cuts) increased in the Brazilian market in June, ending the month on the rise. Valuations were primarily linked to the faster trading pace in both the domestic and the international markets, which boosted the demand from large-sized processors for animals in the independent market.
In Brazil, some important consuming regions relaxed social distancing advice, which favored the demand for pork meat. Abroad, Cepea collaborators reported that the demand from China was high in June, which may be linked to both the African swine fever (ASF) outbreaks in Asia and the foot-and-mouth disease. In May, China and Hong Kong received 73.1% of all the pork products Brazil exported.
Despite the price rises compared to that in previous months, quotes in June/2020 were lower than that in the same period last year, in nominal terms. Last month, the average price for live hog (delivered to slaughterhouses in the SP-5 region – Bragança Paulista, Campinas, Piracicaba, São Paulo e Sorocaba) closed at 4.72 BRL per kilo, 5.6% up compared to that in May, but 9.1% below that in June/19.
For pork carcass, prices had the same behavior. In the wholesale market of the Greater São Paulo, the average price for special pork carcass in June closed at 7.16 BRL/kg, 8.2% higher than that in May, but 7.5% lower than that in June/19.
As regards pork cuts, prices increased even more sharply, pushing up the averages in June/20 to higher levels than in June/19. Besides the firm demand, supply was low. Agents from the sector reported that scales have been shorter in some slaughterhouses, due to the sanitary measures to stop coronavirus. On the average of the regions in São Paulo State, pork rib prices averaged 13.48 BRL per kilo in June, 16.7% higher than in May and 17.1% up compared to that in June/19.
POULTRY – The decrease in the purchase power of Brazilian consumers, due to the economic effects o the covid-19 pandemic, favored chicken meat sales in June, which is usually cheaper than beef and pork meat. Besides, according to agents from the sector consulted by Cepea, as some regions relaxed social distancing advice, the demand for chicken meat increased.
In this scenario, prices rose last month. As processors’ inventories were low, higher sales in the wholesale market led slaughterhouses to increase animal purchases, pushing up live chicken quotes. Thus, the purchase power of chicken farmers against the major inputs consumed in the activity, corn and soybean meal, increased, since prices for both products dropped.