Genesus World Market Report-Brazilian Market September 2010
BRAZILIAN MARKET
By Martin Riordan1
The hog market in Brazil has different characteristics in different regions. In the three southern states (South region – Rio Grande do Sul, Santa Catarina and Paraná), where about 64% of commercial production takes place, most production is carried out under contract for an ever-smaller number of plants. Independent production represents only 10-20% of total production, and prices for independent producers are depressed by the limited number of selling options.
In the four states of South East Brazil (São Paulo, Minas Gerais, Rio de Janeiro and Espírito Santo), plus the state of Goiás, independent production dominates, and there are many small plants purchasing on the spot market. As a result, spot prices tend to be 10-20% higher than in the South. Jointly these five states account for around 23% of national commercial production.
Specific prices quoted in this report refer to the South of Brazil.
Hog prices in all Brazil plummeted with the advent of the financial crisis of 2008. The immediate effect on exports, due to importers’ credit problems, caused a fall of some 45%. However, this coincided with increased production which maintained prices low even after exports returned to normal. During 2009, the H1N1 virus also depressed home demand as it was erroneously associated with pigs.
Since October of 2008, prices hovered around US1.00 per kg. live weight until October 2009, when they climbed to around $1.30. They dipped again over the end of the year but by February had returned to a level of $1.30 and remained around this value until recently.
At the beginning of August, prices began a steady increase. Currently (early September) they are almost $1.50 per kg., an increase of 50% compared to the dreary days of 2009. Brazil is very short of reliable statistics and therefore of meaningful projections too. However, it is generally expected that prices will remain firm at least until the end of 2010.
On the cost side, mostly represented by corn and soya meal, there has been a considerable reduction in costs during the first eight months of 2010. The principal corn harvest, taken in January, brought the cost of corn to some US$ 162 per tonne, and soya meal prices came down to around $315 per tonne. With lower costs and higher hog prices, producers have managed to earn a small but welcome profit in 2010. However, over recent weeks both corn and soya meal prices have increased. Corn is now some 40% more expensive and soya meal almost 30% more. So much of the recent increase in hog prices is absorbed by increased costs.
Exports of pork represent some 20% of production and variations in export quantities and prices can have a dramatic effect on hog prices. The recent increase in prices has been attributed by the experts to strong home demand, but the export figures show that increased exports might be having an effect too.
The table above shows that in August, for the first time since January this year, export volume was higher than in 2009. We are now entering the period of the year when monthly exports are traditionally highest. If the monthly figures match or exceed those of last year, it is more likely that hog prices will continue producing profit at least until the end of 2010.
1Martin Riordan
Genesus Representative in Brazil
Email mariordan@gmail.com
Tel 55-55-8111-1869
