Porto Alegre, July 14, 2021 – The meat industry exports performed well during the first half of the year. Once again shipments for the Chinese market were the main highlight. The dependence on China is enormous for both beef and pork. Speculation has grown in recent weeks, with a series of diverging pieces of news regarding the Chinese situation. The fact is that the lack of transparency of the local government makes the assessment of the Chinese picture more complex. The issues surrounding China will be discussed further ahead.
Chicken exports remain less dependent on the Chinese market. Halal shipments remain an important differential. Apparently, the Saudi embargo did not bring as many problems as expected, and the performance of chicken shipments was quite satisfactory in the period. In the first half of the year, Brazil exported around 2.18 million tons, an increase of approximately 5.9% over the same period last year. China imports around 50 thousand tons of Brazilian chicken every month, it is the main market, but the dependence is much lower. Nearly 15% of Brazilian shipments are bound for the Chinese market.
Keeping this pace, Brazil will easily surpass 4 million tons of chicken in 2021, maintaining its position as the main global exporter of the protein. With the dollar operating above the level of BRL 5.00, Brazilian chicken remains very competitive in most markets.
For pork, the general performance was also quite positive in 2021. Brazil gained market share against the United States and the European Union, boosting its exports to China. In the first semester, Brazil shipped around 551 thousand tons, the best volume ever exported in a year’s first half, approximately 17% higher than in the first half of 2020, when Brazil had exported around 471 thousand tons.
The Brazilian swine industry is the segment that most depends on China. Directly or indirectly, the Chinese market accounts for roughly 68.3% of Brazilian pork shipments. Therefore, any movement within the Chinese market impacts local expectations, and the same happens in the case of the beef industry.
Beef exports showed more timid performance compared to the same period last year. This is another sector highly dependent on China. The strong pace of shipments was one of the main reasons for the detachment of fattened cattle prices for the last two and a half years. The exchange rate has offered high competitiveness to domestic beef, however, relevant markets reduced their buying pace in 2021, making this segment even more dependent.
In the first half of the year, Brazil exported around 1.28 million tons of beef in carcass equivalent, down 3.4% from around 1.33 million tons in the same period last year.
China accounts for 57% of Brazilian beef exports, directly or indirectly. Recent uncertainties surrounding the Asian giant’s potential for purchases for the rest of the year generated instability in the Brazilian market, producing a very aggressive bearish movement for fattened cattle futures on B3 in June. A more appreciated real against the dollar during the period also contributed to this movement. At the turn of the month, the market assimilated the news more coherently way and corrected part of the losses.