Brazilian swine market continues with sluggish business environment and low prices

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Porto Alegre, April 9, 2021 – March was a difficult month for the Brazilian market, considering the general fall in prices, both in wholesale and the live pig sector. Moreover, the cost of production has been increasing across the country, squeezing the pig farmer’s margins, already negative in many cases. Corn, the main feedstuff component, remains with a bullish trend and no signs that indicate any relief in the short term, given the supply restriction, with the market centered on the soybean logistics. Another point that begins to generate uncertainty and speculation for corn is the climate for the second crop. As for cost, there is little that farmers can do about it, considering that each commodity follows its own dynamic. In the case of pork, the market copes with a surplus supply, and a production adjustment is necessary for the market to find balance. Export is the variable that escapes the negative spiral, presenting excellent results, driven by purchases from China, however, the internal environment is so sluggish that the flow sent abroad is not enough to significantly reduce supply surpluses.

The high cost of animal nutrition hinders the maintenance of animals on farms, which are slaughtered with a lighter weight. Moreover, deteriorated margins tend to discourage housing, resulting in a decline in the supply of animals in the medium term, given the production cycle.

With the difficult situation of domestic demand, slaughterhouses act with caution in the acquisition of animals for slaughter. The advancement of COVID-19 and the severe restrictive measures used to confront it in much of the country jeopardize important demanding activities, such as restaurants. This scenario is temporary, and as soon as the reopening of trade occurs, the pork flow tends to improve and favor the replenishment along the chain. However, it is worth noting that the full resumption of economic activity will depend on mass vaccination, still in its initial phase in Brazil, thus, domestic demand will evolve timidly for a long period.

During the first half of April, the payment of salaries may bring some relief to consumption. The new round of emergency aid, albeit to a lesser extent compared to 2020, and the payment in advance of the 13th salary of retirees, are also variables that can stimulate demand. Another point that deserves attention is that the exchange ratio between pork and chicken has shortened with the sharp lows registered for the past few weeks, that is, pork is gaining attractiveness amid end consumers. In view of the current scenario of economic uncertainty, chicken is the favorite animal protein on the table of Brazilian households, but the reopening of consumer hubs can better distribute the consumer’s choices.

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