Production costs for beef cattle increase 2.1% in the 1st semester

Cepea, August 5 2019 – The production costs of Brazilian beef cattle increased in the first semester of 2019, according to surveys conducted by Cepea in partnership with CNA (Brazilian Confederation of Agriculture and Livestock).

 

From January to July, the Effective Operational Cost (EOC) for beef cattle rose 2.12% on the “Brazil average” (which considers the states of AC, BA, GO, MA, MG, MS, MT, PA, PR, RO, RS, SP and TO). In the same period last year, the EOC had increased by 1.58%. Still, the rise in the first half of 2019 was below the inflation in Brazil (IGP-DI) in the period, of 4.39%.

 

According to the survey from Cepea/CNA, among the production stages in beef cattle, the one that had the sharpest rise in production costs was backgrounding and finishing. The EOC of backgrounding and finishing farms increased 5.35% in the first semester of 2019. The main group of inputs that influenced this scenario was animal purchase, which increased 4.26% in the period – it is worth to mention that animal purchase accounts for 65% of growers’ expenses. Concerning revenue, on the “Brazil average”, fed cattle prices dropped 1.19%.

 

BRAZILIAN MARKET – Fed cattle arroba quotes remained firm in July. Although the ESALQ/B3 Index for fed cattle (cash price, São Paulo State) dropped 2.58% between June 28 and July 31, it averaged 153.12 BRL in July (1 – 31), 2.1% higher than that in June. The average in July is also 2.3% higher than that from July 2018, in real terms (values were deflated by the IGP-DI from June/19).

 

With the low demand in Brazil, due to the also low purchase power of consumers, the good exports performance underpinned beef prices in the national market in July. Besides, the supply of animals ready for slaughter has been controlled, helping to underpin quotes, despite the relatively long slaughter scales at some plants.

 

The good exports performance along 2019 and the possibility of higher shipments – due to the increase in the amounts sent to specific destinations and/or the opening of new markets – may favor the recovery of arroba prices in the coming months.

 

HOG – After rising for four months, live pig and pork meat quotes dropped in all the Brazilian regions surveyed by Cepea in July. According to Cepea collaborators, the downward trend of quotes reflects the lower demand from processing plants for live pig.

 

With the African Swine Fever outbreaks (ASF), mainly observed in Asia, the Brazilian processing plants certified to export sharply increased animal purchases in the last months. However, although pork exports performance has been high this year, agents expected sales to be even higher. In that scenario, in July, the purchases pace from slaughter facilities slowed down, pressing down quotes for both live pig and pork meat.

 

Between June 28 and July 31, the steepest price drops were observed in the market of Minas Gerais States. In Patos de Minas (MG), prices for the live pig delivered at processing plants averaged 4.81 BRL per kilo on July 31, 16.6% down compared to that on June 28. In Ponte Nova (MG), the animal devaluated 15.9% in the same comparison, to 4.82 BRL per kilo on July 31.

 

In the SP-5 region (Bragança Paulista, Campinas, Piracicaba, São Paulo and Sorocaba), live pig prices averaged 4.69 BRL per kilo on July 31, 14.8% down compared to that on June 28.

 

Concerning the pork meat market, quotes dropped sharply in July too. The price averages for common and special pork carcasses in the wholesale market of the Greater São Paulo averaged 6.73 BRL and 6.91 BRL per kilo on July 31, 13.8% and 15.3% down compared to that on June 28.

 

POULTRY – Broiler meat prices had opposite behaviors among the regions surveyed by Cepea in July. In some areas from southern Brazil, mainly in Paraná State, quotes rose slightly, while in São Paulo and Minas Gerais, values decreased – in this case, price drops were linked to the low liquidity in the Brazilian market during the month, due to school vacations and low temperatures, which usually reduce the demand for this product.

 

In Paraná, however, despite this scenario, the fast exports pace underpinned quotes in July – shipments appeal reflects, among other factors, the prices paid for the Brazilian product in the international market, which increased 3.8% from June to July, averaging 1,686.00 USD per ton last month.

 

Thus, in Toledo (PR), one of the most important broiler-exporting regions in Brazil, frozen chicken prices rose 0.9% in the wholesale market between June 28 and July 31, to 5.13 BRL per kilo on July 31. Chilled chicken quotes, in turn, increased 0.8% in the same comparison, to 5.04 BRL per kilo.

 

In the wholesale market of the Greater São Paulo, frozen chicken prices averaged 4.52 BRL per kilo on July 31, 1.8% down compared to that on June 28. Chilled chicken quotes averaged 4.54 BRL per kilo on July 31, 2.1% down in the same comparison.

 

(Cepea-Brazil)

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