Porto Alegre, April 23, 2021 – The performance of animal protein exports in March was quite satisfactory, and the pork was the highlight, showing an excellent growth compared to last year. Once again, China was the great differential, absorbing very significant volumes. It is important to mention that the quarterly performance of beef was negative due to the more discreet sales volume during the first two months of the year. For chicken, the performance was slightly higher. In the case of beef, particularly, an important factor is the scarce supply during the first four months, which hindered the availability of animals that might meet the export requirements of the Chinese market and its feedlot regime.
In the case of chicken, China is likely to reduce imports. Since the beginning of the African swine fever (ASF) outbreak, China has invested in its chicken farming, aiming to offer quality protein at lower prices. As chicken has a shorter cycle, this strategy is quite feasible. According to USDA, China must produce approximately 15 million tons of chicken in 2021, up 2.74% from 2020. For imports, USDA estimates the volume of 840 thousand tons, down 16% from 2020. However, animal health problems jeopardize this expectation, avian influenza has returned strongly in recent months, severely affecting chicken in Europe and Asia. Unlike ASF, the control of influenza is more complex, considering migratory birds and their routes. For the time being, the Americas remain free of the disease, which is very different from the 2015 outbreak, which decimated the US chicken flock.
ASF is another element that remains on the market’s radar, however, there is no clarity about the real situation in Asia. The OIE has not released any report about it for more than a month, and the only reliable information comes from the FAO, signaling a few cases in the region. In turn, news agencies and private consultancies still indicate a rampant advance of the disease, to the point of incisively damaging the process of replenishment of the herd of matrices.
Exchange rate movements during the quarter were undoubtedly fundamental for the advance of commodity exports in the period. For the meat industry, this premise is also valid. At a time of slow recovery in economic activity, the preference of Brazilian agribusiness for the foreign market is evident, with the real presenting little room for robust appreciation. The trend is that there will be few changes in these dynamics in most of 2021.
Chicken showed a slight growth compared to the first quarter of 2020. The exported volume reached the level of 1 million tons, only 0.27% higher than in the same period last year. China accounts for nearly 14.7% of the volume exported by Brazil, having imported around 148 thousand tons in the period. It is important to highlight the resumption of a good pace of sales to Saudi Arabia, which absorbed around 12% of the volume exported by Brazil, around 121 thousand tons. Unlike competing proteins, chicken exports are better distributed, mainly in the case of halal shipments. In other words, China’s tendency to reduce imports of chicken may be offset by the advance of other traditional importers. Brazil continues to be the leader in halal exports, this is a market that has more than 1.5 billion consumers around the world, so it is quite natural that the Brazilian industry strives to serve this market segment.
For beef, the volume exported in the first quarter hit 597 thousand tons in carcass equivalent, down 0.9% from the same period last year. In general, beef is highly dependent on the Chinese market, which absorbs around 46% of Brazilian exports, with an imported volume of 275 thousand tons. Hong Kong is the second main market for Brazilian beef, with a share of approximately 12% of Brazilian exports. As already mentioned, Hong Kong is an autonomous territory of China and has the habit of passing on part of its purchases to mainland China, that is, directly or indirectly, China accounts for roughly 58% of Brazilian exports. The decline in exports reaches other importers, such as the European Union, Chile, and Egypt. Chinese imports increased by more than 30% compared to the first quarter of 2020. Another aspect that impacted shipments was the scarcity of supply in the domestic market, especially in the first quarter.
Finally, we get to the main highlight of the trade balance for the meat industry in the first quarter. Pork exports increased by around 21.3%, with 248 thousand tons. March was marked by an absolute record of shipments, surpassing the volume of 107 thousand tons. China remains the main highlight, absorbing 53.5% of Brazilian shipments, reaching a volume of 132.85 thousand tons. Hong Kong accounts for 14.8% of Brazilian exports. In other words, China directly or indirectly holds 68.3% of Brazilian pork shipments. Brazil finds it very difficult to expand markets for this protein. Historically, there has been evidence of dependence on a market. At the beginning of the last decade, Russia and Ukraine occupied that position. With the changes in these markets, there was a sharp decline in Brazilian shipments, which resulted in a serious crisis for the local pig farming.
For the Brazilian meat industry, while China continues buying, Brazil tends to maintain a good result in exports. For 2021, a good pace of shipments must continue. Should the process of herd replenishing be confirmed, the trend is that the pace of shipments will be more modest from 2022, with China getting increasingly more self-sufficient in the production of animal protein.