Cepea, January 4, 2021
CATTLE – The records registered in the Brazilian cattle sector in 2019 were renewed in 2020. The fast exports pace for the national beef, primarily to China, added to the low supply of fed cattle (confirmed by official data indicating lower slaughter most of the year) kept prices for both fed cattle arroba and beef on the rise in the Brazilian market most of 2020.
As in 2019, fed cattle prices rose sharply in November/2020, renewing the real record in the series of Cepea, which began in 1994. Thus, in November 2020, fed cattle prices neared 300.00 BRL.
However, the price rises observed for fed cattle in 2020 do not mean that Brazilian cattle farmers had higher profit margins, since quotes for calf and lean cattle were at record levels (in real terms) in their respective series of Cepea along the entire year. Besides the high price levels for calf and lean cattle – which account for more than 50% of production costs in backgrounding –, the sharp dollar appreciation in 2020 pushed up the prices for the inputs that are imported. Prices for the major inputs used in feed, corn and soybean meal, rose sharply in 2020 too.
As regards meat processors, while the fast exports pace and the strong dollar favored revenue, the slaughterhouses that sell meat only to the domestic market had to deal with fed cattle prices at record levels and a slightly weak demand for beef. It is worth to mention that, during most of 2020, the purchase power of Brazilian consumers was lower because of the economic crisis caused by the covid-19 pandemic. Thus, many consumers opted for purchasing cheaper animal protein, such as pork, chicken meat and eggs.
Fast exports favored the performance of the Brazilian cattle sector in 2020. Calculations of Cepea in partnership with CNA (Brazilian Confederation of Agriculture and Livestock) show that, between January and September 2020, the national livestock GDP increased by a staggering 13.79%, while the agricultural GDP rose by 6.12%. Thus, the Brazilian agribusiness GDP increased by 8.48% in the first eight months of 2020.
FED CATTLE – The CEPEA/B3 Index for fed cattle began 2020 at 235.34 BRL, averaging 285.33 BRL in November, a real record in the monthly series of Cepea, which began in 1994 (monthly averages were deflated by the IGP-DI from July/20). However, in December, quotes were pressed down by purchasers, who were not interested in closing deals. The supply of fed cattle ready for slaughter increased slightly at the end of the year, due to the end of the second feedlot cycle.
EXPORTS – In 2020, the Brazilian exports of in natura beef continued at the same pace observed in 2019, with monthly volumes higher than 100 thousand tons. In November, Brazil exported 170 thousand tons of the product.
From January to November, Brazil shipped 1.582 million tons of in natura beef, 14.35% up from that in the same period of 2019 and 17% higher than the volume exported in 2018. In 2020 (not considering exports in December), sales to the international market were a record. Revenue from these shipments totaled 35.5 billion BRL, 40% higher than that received in 2019 and a record.
HOG – The covid-19 pandemic brought many uncertainties and challenges to agents in the Brazilian hog sector in 2020. After dropping sharply between March and April, prices for both live hog and pork meat began to increase in all the regions surveyed by Cepea, setting real records in September. Exports and slaughter set records too.
Prices for live hog and pork meat dropped sharply between mid-March and April, when the new coronavirus began to spread throughout Brazil, leading cities and states to take social distancing measures, which reduced significantly the demand for pork products. While liquidity was low in the market of pork meat, since restaurants and other food services were closed and/or working partially, inventories grew at meat processors, and demand for hog for slaughter decreased.
In May, the Brazilian hog market warmed up again, boosted by pork meat exports, which set a record (101.1 thousand tons), and higher domestic demand. In the following months, shipments continued to have a good performance. China continued as the number one destination for the Brazilian pork meat, which has been observed since March/2019.
Between January and November 2020, China received 50.4% of the total volume of pork meat Brazil exported, accounting for 468.6 thousand tons, a staggering 115% up from that in the same period of 2019, according to data from Secex (Foreign Trade Secretariat). Considering all destinations, Brazil exported 929.6 thousand tons of the product in 2020 (Jan. – Nov.), a record. The exporting sector was favored by the currency exchange rate. Revenue from exports totaled 10.7 billion BRL, 94.3% higher than that received in 2019 and a record.
In Brazil, the emergency aid paid by the federal government and the gradual resume of economic activities, as well as the valuation of beef, boosted sales of pork meat and live hog.
In this context, the domestic prices for live hog and pork meat skyrocketed, setting real records in September in all the Brazilian regions surveyed by Cepea. In the following months, new records were set. In western Santa Catarina, live hog prices hit 9.70 BRL/kg in November, the highest level among the regions surveyed.
Despite the lower supply of animals for slaughter in some periods, majorly in September, data from the IBGE indicate that hog production between January and September 2020 was a record, totaling 36.8 million heads slaughtered.
Although exports had a good performance and prices were at record levels in parts of the year, the purchase power of hog farmers against feed inputs decreased compared to that in 2019. Prices for corn and soybean meal rose even more sharply than that for live hog in 2020, reducing farmers’ profit margins, primarily at the end of the year.
Considering corn sold in the wholesale market of Campinas (SP) and live hog traded in the SP-5 region (Bragança Paulista, Campinas, Piracicaba, São Paulo and Sorocaba), hog farmers were able to purchase 6.59 kilos of corn by selling a kilo of hog on the average of 2020 (from Jan. 2 to Dec. 28), 10.1% down from the average in 2019.
As for soybean meal marketed in Campinas, hog farmers were able to purchase 3.44 kilos of the by-product by selling a kilo of the animal on the average of 2020, 11.1% down from 2019.
POULTRY – In 2020, Brazilians’ purchase power decreased due to the economic effects of the coronavirus pandemic, which favored chicken meat sales compared to negotiations of beef and pork meat. Moreover, players from the sector say that the emergency aid, provided by the federal government, also contributed to boost chicken meat sales. Therefore, the price gap comparing chicken meat to beef and pork carcasses hit a record in 2020.
The most significant price gap ever registered by Cepea, regarding the monthly series, which started in 2004, was registered in November, when prices of the whole chilled chicken in the wholesale market of the Greater São Paulo were 12.73 Reais/kilo below beef carcass quotes and 7.53 Reais/kilo lower than special pork carcass values. From January 2 to December 28, while beef and pork prices soared 35% and 32%, respectively, chicken quotes increased less, 9%.
Chicken meat prices started the year in a downward trend, as it is usually observed in January, due to extra expenses in the period. Moreover, the market was also searching for a balance after significant price rises in late 2019. In the following months, the demand remained weak and the pandemic reinforced price drops.
Difficulties to flow the production in the Brazilian market, mainly because of the reduction or interruption of the demand from schools and food services, as hotels and restaurants, pressed down quotes in the entire poultry sector. The production of both live animals and chicken meat was higher than demand, also leading to price drops, in order to increase liquidity.
As a result, in May, most products in the poultry sector surveyed by Cepea registered very low prices. In that month, whole chilled chicken meat values in the Greater São Paulo averaged 3.96 BRL/kilo, the lowest, in nominal terms, since August/2018 (when the average was 3.60 BRL/kilo). Live chicken quotes in the wholesale market of São Paulo State averaged 2.91 BRL/kilo, the lowest since February/19.
Besides lower demand, chicken meat supply increased. Data from the IBGE indicate that the Brazilian production of chicken meat increased 2.5% in the first nine months of the year compared to the same period in 2019, reinforcing price drops.
On the other hand, exports increased, helping to reduce chicken meat supply in the domestic market. Although shipments of the product had not been as significant as those observed for beef and pork meat (which hit records), chicken meat exports increased 1.4% between January and November 2020 in relation to the same period last year. Sales were boosted by trades with China and Singapore – data from Secex.
As months went by, and economic activities regained pace along with the emergency aid, chicken meat quotes increased again in the domestic market. However, prices rose less compared to beef and pork values, increasing its competitiveness. Players surveyed by Cepea say that the lower purchase power of Brazilians because of the crisis brought by the pandemic increased the demand for cheaper products, such as chicken meat.
PURCHASE POWER – Prices of both soybean meal and corn, important inputs used in the poultry sector, soared in 2020. Live chicken quotes, in turn, increased less intensively, pressing down the purchase power in 2020. In addition to this scenario, several players surveyed by Cepea reported difficulties to find large volumes of soybean meal and corn. 2020 was the most unfavorable year for producers in the poultry sector since 2011.