Feeding costs are a major concern for the meat sector for the first half of 2021

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Porto Alegre, December 4, 2020 – The meat sector coped with inflated animal feeding costs in the second half of 2020. Corn and soymeal prices set historical records and ended up putting pressure on the margins of the chicken industry. Fortunately, for confinement and swine and dairy products, final prices have also surged, mitigating the effects of rising costs.

However, from November, changes in this pattern of costs have become clear, with soymeal and corn prices decreasing. The consequence was also felt in peripheral products, with flours of animal origin, citrus pulp, and other inputs also retreating in the Brazilian market.

For the first semester, there is a factor that needs to be considered in the structure of animal feeding costs: the retraction in the corn supply in the domestic market. With a summer crop in 2021 17% lower than in the current year, there will be a great difficulty in the building of stocks. Therefore, the supply in the first semester will be very difficult, with a smaller summer acreage, added to inevitable crop losses in Rio Grande do Sul and Santa Catarina. There are two options for consumers: corn imports or even reduction in their demand. The trend is that supply is normalized only in July, with the arrival of the corn second crop. In other words, this is a long period based on the restriction of supply. Moreover, logistics will be focused on the transportation of soybeans, resulting in higher freight costs.

For the pig industry, the estimate of growth of the herd of matrices next year is an important variable for the market dynamics. The sector must expand the herd of matrices by at least 5%, in response to the sharp rise in prices in 2020. The housing of breeder chicks should also remain at a high level. That is, there is a great need for the consumption of corn and soymeal.

For chicken farming, the great advantage is that it is possible to correct the route more easily, since its cycle is relatively short. For pig farming and confinement, this kind of change usually takes years, given the characteristics of each activity. It remains to be seen whether there will be the capacity to pass on this additional cost along the production chain. The economic recovery in 2021 will play an important role in this movement.

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