Porto Alegre, April 9, 2021 – Meat prices have shown different movements in 2021, starting with the cattle industry prices, which break historical records every week. The supply of finished animals is too narrow in 2021, resulting in the acceleration of prices. Beef showed a strong bullish movement for forequarter, while hindquarter fell. This movement is a consequence of the consumption profile over the year.
The advance of the pandemic in much of the country created the need for the adoption of more severe measures in terms of social mobility. This environment affected the economy in several ways. Focusing only on meat consumption, the limitations surrounding the opening of restaurants, bars and other establishments, which are fundamental demanders of prime beef cuts, must be mentioned. Another aspect is that with a slower-than-expected economic recovery process, difficulties persist in creating jobs and income. With average consumers without capital, it is natural that there is a predilection for products that have less impact on average income, such as the cuts of beef forequarter and mainly frozen or chilled chicken.
With all the macroeconomic difficulties seen in 2021, the expectation is that this dynamic will continue for most of the year. In other words, there may be a partial repetition of the events of 2020. The big difference lies in vaccination, its advance is more than necessary for an orderly process of resumption of economic activity, lowering the risks of collapse in the health system. With this kind of environment in mind, the spread between forequarter and hindquarter has fallen in the São Paulo market, the country’s main consumer center.
For pig farming, the year 2021 has been marked by enormous volatility. Prices alternate movements of a frightening decline and aggressive reaction. This kind of environment is very harmful to the activity. At the heart of the problem is the supply surplus, with production focused on the international market. However, the largest share of Brazilian production is bound for the domestic market. Pork was the protein that showed the biggest decline compared to its competitors. The fact is that there was an interesting competitiveness gain, especially against beef. In this case, pork cuts become an alternative to prime beef cuts, which continue at a prohibitive level for an overwhelming portion of the population.
Chicken, in turn, continued its upward movement during the first half of March, followed by falling prices in the second half. Despite the good performance of exports, downward pressure is evident due to excess supply in the domestic market. Both chicken and pig farming has been severely pressured by rising animal nutrition costs. As previously mentioned, corn prices skyrocketed in March, with a corn bag closing the month at BRL 100 CIF Campinas.
In terms of competitiveness, chicken is ahead of other proteins, however, the aggressive decline in swine production has resulted in a reduction of this competitiveness in the bimonthly comparison. Chicken was 1.7 times more competitive than swine carcass in February, while in March, the ratio dropped to 1.55 times. There was also a reduction in the competitiveness of chicken against hindquarter. In March, chicken was around 3.35 times more affordable than that cut. Forequarter lost competitiveness against chicken, being nearly 2.77 times more expensive.
Even with all this movement within the meat industry, it is always important to mention that chicken is still the favorite animal protein of an important portion of the population. This dynamic does not tend to change until there is a process of consolidated resumption of economic activity, with the creation of a good level of employment and income. Pork appears as an alternative, however, pig farming shows clear signs of imbalance, needing adjustments to improve its profitability.
The cattle industry continues as a point outside of the curve, with constant and very aggressive upward movements. Even though the domestic demand does not stand so many readjustments, the dollar progress encouraged exporters to act more emphatically in the purchase of cattle, making negotiations at BRL 320/arroba in São Paulo something usual. The supply limitation will be constant throughout the month of April, so beef prices tend to remain high for most of the month. Only with a more consistent seasonal supply of animals, between May and June, this dynamic will be changed, but prices are not likely to plummet. Resilience will be the main mark of the beef industry in 2021.