Brazilian pig market remains fragile, with deteriorated margins

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Porto Alegre, June 2, 2021 – The month of May exposed major weaknesses and concerns, such as low prices of hogs and high cost of production, factors that squeeze the activity’s margins. This adverse scenario affects the behavior of farmers in negotiations, mainly for those with a lower cash flow, accelerating the sale of animals but at the same increasing the level of market supply. Those who manage to hold the animals on the farm, even for a short period, will trade animals with a higher average weight in the future, which means greater availability of meat in the market. The current scenario of costs, deteriorated margins, and losses tend to discourage production, but the effects will only be seen in the medium and long term, given the production cycle.

Meat-packers have adopted a cautious posture in the purchase of animals, with management of stocks, considering that the flow of cuts in wholesale has progressed with difficulty. A point that helps explain the difficulty with domestic demand is the adverse economic scenario, aggravated by the pandemic, impacting the population’s income. Besides, the level of unemployment is growing in the country.

The average price of live hogs traded in Brazil’s Center-South was BRL 5.43 last Thursday (27), down 21.1% from BRL 6.88 at the close of April. The perspective is that the downward movement will lose intensity in the first half of June, with the possibility of readjustments, considering that the strong downward movement of carcass ended up reducing the spread against chicken, reaching the lowest level since May 19. In other words, the attractiveness of pork has increased, which may result in better replenishment in the short term.