Suspension of exports to China press down arroba quotes in Brazil

Cepea, June 19 2019 – Fed cattle arroba quotes dropped sharply in the Brazilian market in the first fortnight of June. Between May 31 and June 14, the ESALQ/B3 Index for fed cattle decreased 2.6%, closing at 149.20 BRL (38.33 USD) on June 14.

 

This downward trend of quotes was linked to the news indicating an atypical case of mad cow disease in Mato Grosso State. As a preventive measure, Brazil’s Ministry of Agriculture and Livestock suspended beef exports to China, initially for a month. In light of that, agents from slaughter facilities, mainly exporting plants, interrupted animal purchases, sharply pressing down quotes. On June 13, however, the governments from Brazil and China decided to resume trading beef.

 

Between January and May 2019, Brazil shipped 687.6 thousand tons of beef to the Asian country, 16% more than in the same period of 2018. China and Hong Kong altogether have received 39% of all the beef volume exported in 2019. Although these countries’ share in the total Brazilian beef exports decreased from 2018 to 2019, the amounts shipped to China and Hong Kong increased 0.72% in the annual comparison.

 

Other relevant destinations for the Brazilian beef in 2019 have been Iran and the United Arab Emirates. Iran has purchased 41.56 thousand tons of the Brazilian beef this year, 45.7% more than it did last year. The UAE, in turn, has imported 40.36 thousand tons of the national beef, a staggering 370% up in the same comparison.

 

EXPORTS – Between January and May, the Brazilian beef exports (in natura) were at a fast pace and the revenue from shipments in that period was a record. The beef volume exported in the first five months of 2019 totaled 567.2 thousand tons, 18.24% higher than that from the same period of 2018, but a slight 4.39% lower than the record from 2007 (593.28 thousand tons), according to data from Secex.

 

Concerning revenue in Real between January and May, it totaled R$ 8.23 billion, 25.7% higher than that between January and May 2018 and a record for the period. The amount received this year is almost three-fold that from 2007. In this case, the strong US dollar, which averaged 4 BRL in May, and the higher prices paid for the beef ton justify this result.

 

Considering only May/19, Brazil exported 121 thousand tons of beef, 10.16% more than in April and 33.59% more than in May/18, still according to Secex. As for revenue, it totaled R$ 1.87 billion in May, 15.7% higher than in April and 36.36% up compared to that from May/18. That is also the highest monthly revenue in 2019.

 

 

HOG – The Brazilian exports of pork meat continue to grow, but the supply of animals for slaughter is not increasing as much. In light of that, live pig and pork meat quotes rose in all the regions surveyed by Cepea in the first fortnight of June. Among the areas surveyed, live pig prices increased the most sharply in the independent market

 

According to Secex, in May, Brazil shipped 66.4 thousand tons of pork meat, 10% more than in April and 41% more than in May/18. According to Cepea collaborators, the appeal of international sales led the slaughterhouses that usually supply the Brazilian market to allocate production to the international market.

 

This scenario was mainly observed in the market of Minas Gerais, where pork exports increased in May, lowering supply and pushing up quotes in that state. In May, MG exported 1.2 thousand tons of pork, 31% up compared to that in April. Compared to May/18, shipments increased by almost 50%.

 

In Ponte Nova (MG), live pig prices averaged 4.57 BRL per kilo in May, 8.1% up compared to April and 36.6% more than in May/18 (values were deflated by the IGP-DI from May/19). In southern MG, quotes rose 8.4% and 34.5% in the same comparison, averaging 4.50 BRL per kilo in May.

 

BRAZILIAN MARKET IN JUNE – Live pig quotes increased in all the regions surveyed by Cepea in the first fortnight of June. Collaborators reported high demand from slaughterhouses along with low animal supply in some regions.

 

The sharpest price rise in the first half of the month (May 31 to June 14) was observed in Sorriso (MT), at 9.1%, to the average of 4 BRL per kilo on June 14. In southwestern Paraná, prices increased 11.2% in the same period, to 4.98 BRL per kilo. In the region of Serra Gaúcha, quotes rose 7.9%, to 4.71 BRL per kilo on June 14.

 

EXPORTS – With the decrease in the Chinese pig production, due to African Swine Fever (ASF) outbreaks, China has been importing larger volumes of the Brazilian meat. Considering only in natura pork, in May, the revenue in Real obtained from shipments was the highest in all Secex series, which started in October 2002. Three factors contributed for the record result reached in May: the larger volumes exported, high pork prices and the US dollar appreciation.

 

According to Secex, Brazil exported 58.1 thousand tons of in natura pork meat in May – the largest volume since August/17, when shipments totaled 58.9 thousand tons. The result obtained in May was also 14% higher than that from April and 41% higher than that from May/18.

 

The amounts exported in May reflected the high daily average of shipments: while in the 21 working days of April the average was at 5.3 thousand tons, in the 22 working days of May, it was at 6 thousand tons, 14% higher. Compared to that in May/18, it was 50% higher.

 

Concerning the price paid for the Brazilian pork meat, it increased 5% from April to May, averaging US$ 2.27 per kilo in May. Compared to May/18, the pork meat exported in May/19 was 11% more expensive, in nominal terms. In Reais, the exports price for pork meat was R$ 9.06 per kilo – in the Brazilian market (wholesale market of the Greater São Paulo), the special pork carcass was traded for R$ 6.78 per kilo in May, on average. It is worth to mention that the higher prices paid for the product exported makes the international market more appealing than sales in Brazil.

 

Revenue from pork meat exports (in natura) in May, in turn, totaled US$ 131.6 million, 19% up compared to that from April and 58% higher than that from May/18 (Secex). In Real, revenue increased even more: 22% in the monthly comparison and 73% in the annual comparison. In May, revenue in Real hit a record, totaling R$ 526.32 million. The US dollar averaged 4 BRL in May, against 3.90 BRL in April.

 

 

POULTRY – Higher liquidity, which is typical for the first fortnight of the month, due to the payment of workers’ wages, pushed up broiler meat quotes (chilled and frozen) in the first half of June. However, this price rise occurred slightly later in that period, since the slow trading pace in both the wholesale and the retail markets in late May increased inventories and constrained possible valuations in early June.

 

Between May 31 and June 14, in the wholesale market of the Greater São Paulo, chilled and frozen chicken prices rose 1.2% and 0.8%, respectively, to 4.81 BRL per kilo (for both) on June 14.

 

In Toledo (PR), a typical broiler-exporting region in Brazil, quotes rose more sharply. Until June 14, frozen chicken prices had increased by 3.9%, and chilled chicken quotes, by 3.2, to 5.32 BRL per kilo and 5.29 BRL per kilo, respectively, on June 14.

 

Concerning chicken cuts (frozen and chilled), the most exported ones, such as chicken breast, had the sharpest price rises in the fortnight. On the other hand, quotes for the mid-joint wing, the chicken thigh and drumstick and the chicken heart allocated to the Brazilian market dropped in that period. In the wholesale market of the Greater São Paulo, chilled heart quotes had the steepest price drop: 7.3% (until June 14), averaging 12.14 BRL per kilo.

 

EXPORTS – African swine Fever (ASF) outbreaks in China have boosted Brazilian exports of animal protein to that country. From January to May this year, China (also considering Hong Kong) purchased 17% of all the broiler meat Brazil exported in the period – China also imported 48% of all the pork meat exported by the country and 39% of all the beef sent to the international market.

 

In May, Brazil sold 54.9 thousand tons of broiler meat to China, a record, according to data from Secex, 40.3% more than the volume exported to the Asian country in April and 48% up compared to that from May/18. Besides the larger volumes purchased, China also paid higher prices for the Brazilian broiler. While in April, chicken cuts and giblets were sold to China at the average price of US$ 1.96 per kilo, in May, that level rose to US$ 2.55 per kilo, 30% up.

 

Saudi Arabia, in turn, was the number two destination for the Brazilian broiler meat. From April to May, Brazilian exports to that country increased 17.5%, totaling 44.3 thousand tons last month.

 

In May, Brazil shipped 381.1 thousand tons of broiler meat, 12.4% up compared to that from April and 14.3% more than in May/18, still according to Secex.

 

(Cepea-Brazil)

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