Annual Livestock Report 2011

An Expert's View about Cattle in Brazil

Last updated: 29 Sep 2011

Post forecasts beef and pork production in 2012 to increase by two percent, after an estimated decline in 2011, supported by a rebound in beef exports and firm domestic demand as Brazilians are able to increase their purchasing power. Despite the uncertainties of the world economy, Brazilian beef exporters also estimate demand to be higher mostly from emerging market economies, which likely will benefit their exports.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 8/16/2011 GAIN Report Number: BR 0715 Brazil Livestock and Products Annual Annual Livestock Report 2011 Approved By: Jeff Zimmerman, Agricultural Attaché Prepared By: Joao F. Silva, Agricultural Specialist Report Highlights: Post forecasts beef production in 2012 to increase by two percent, after an estimated decline in 2011, supported by a rebound in beef exports and firm domestic demand as Brazilians are able to increase their purchasing power. Despite the uncertainties of the world economy, Brazilian beef exporters also estimate demand to be higher mostly from emerging market economies, which likely will benefit their exports. Pork production is estimated to increase by two percent in 2012, mostly supported by the demand from the domestic market, since exports are estimated to decline by one a percent due the uncertainties regarding the Russian market. Page 1 Executive Summary: Post forecasts beef and pork production to increase by two percent in 2012 and pork production to increase by less than one percent in 2012, respectively, supported mostly by the domestic market. The outlook for the Brazilian economy in 2012 is for continued economic growth, but at a lower rate than previous years. Business in general is suffering with one of the highest interest rates in the world, valuation of the currency and rising inflation. However, domestic demand remains strong due to higher consumer purchasing power, mostly from the new Brazilian middle-class, which is supporting consumption for goods in general, including animal proteins. Despite the uncertainties regarding the world economy, mostly due to the so-called rich world struggle with the debt crisis, Brazilian beef exporters are optimistic that world demand for beef will increase in 2012. On the other side, pork exporters are not optimistic about exports next year due to the uncertainties regarding the Russian market and are counting on firm domestic demand and stable feed costs to maintain their profitability. Post revised production and export estimates for Brazilian beef and pork for 2011 to reflect new estimates made by trade sources. These estimates call for a drop in beef production and a small increase in pork production than those previously estimated. In general, domestic demand for both meats is supporting the industry this year, since exports for beef and pork are estimated to decline this year. Page 2 Commodities: Animal Numbers, Cattle Production: After several years of intense cow culling, the Brazilian beef industry is still facing lower availability of finished cattle for slaughter, as currently reflect by the high price of finished cattle at R$ 100 (US$ 64) per arroba (33 pounds). The outlook for 2012 calls for an increase of 3 percent in cattle inventories mostly due to government financing support for cattle herd rebuilding, genetic improvements and pasture improvement. The recently announced Crop and Livestock Plan for the 2011-12 marketing year (Oct 1, 2011- September 30, 2012) provides a total of R$ 107.2 billion (US$ 67 billion) at subsidized interest rates allocated for commercial and export-oriented agriculture, including R$ 750,000 (US$ 480,000), per cattle producer for pasture renovation and herd rebuilding through genetic improvement. The program requires a five-year payment with 18 months grace period. In addition, large beef packers are also increasing financing for their cattle suppliers, similar to the chicken and pork production integration system. In addition, cattle producers can benefit from the Low Carbon Agriculture Program (ABC), with subsidized interest rate of 5.5 percent, per year, to implement the so-called integration of crop- livestock-forest program (iLPF). Although at its initial stage, this program offers a sustainable opportunity for renovation of poor pastures in Brazil, estimated at 90 million hectares, with a significant long term impact on beef production. Trade: The elimination of a special dollar rate for imports of foods and agricultural products in Venezuela at the end of 2010 made Brazilian cattle less competitive in that market. In addition, continued problems with delinquent payments for Brazilian cattle producers combined with the high price of Brazilian cattle will likely contribute to a decline of more than 50 percent of Brazilian cattle exports to Venezuela in 2011. However, cattle traders in Brazil expect a rebound in cattle exports to Venezuela in 2012 as local producers are unable to supply the local market despite protectionist measures from the Government of Venezuela to preserve local producers from competition. The state of Para in the Amazon region is the main source of live cattle for exports, mostly to Venezuela. Brazilian beef packers and exporters continue to criticize exports of live cattle specially now during a period of lower availability of cattle for slaughter. The hides and skins industry also supports beef exporters? complaints about live cattle exports. Production, Supply and Demand Data Statistics: Page 3 An imal Numbers, C 2010 2011 2012 attle Brazil Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: 2010 2011 Jan 2012 USDA USDA O New Post fficial O New P USDA ost fficial O New Post fficial Total Cattle Beg. Stks 185,159 185,159 190,922 190,923 197,278 (1000 HEAD) Dairy Cows Beg. 37,148 37,032 38,372 38,185 39,455 (1000 HEAD) Stocks Beef Cows Beg. 52,007 51,845 53,720 53,458 55,238 (1000 HEAD) Stocks Production (Calf 49,200 49,200 49,300 49,445 49,690 (1000 HEAD) Crop) Intra-EU Imports 0 0 0 0 0 (1000 HEAD) Other Imports 68 68 85 8 15 (1000 HEAD) Total Imports 68 68 85 8 15 (1000 HEAD) Total Supply 234,427 234,427 240,307 240,376 246,983 (1000 HEAD) Intra EU Exports 0 0 0 0 0 (1000 HEAD) Other Exports 655 654 752 388 635 (1000 HEAD) Total Exports 655 654 752 388 635 (1000 HEAD) Cow Slaughter 11,600 11,600 11,350 11,050 10,750 (1000 HEAD) Calf Slaughter 300 300 300 300 300 (1000 HEAD) Other Slaughter 27,500 27,500 28,500 28,040 28,735 (1000 HEAD) Total Slaughter 39,400 39,400 40,150 39,390 39,785 (1000 HEAD) Loss 3,450 3,450 3,320 3,320 3,250 (1000 HEAD) Ending Inventories 190,922 190,923 196,085 197,278 203,313 (1000 HEAD) Total Distribution 234,427 234,427 240,307 240,376 246,983 (1000 HEAD) Page 4 Commodities: Meat, Beef and Veal Production: Post forecasts beef production to increase at around 2 percent in 2012 due to the following factors: a) Higher cattle availability due to investments in herd rebuilding and feedlot; b) an increase of five percent in beef exports, and b) continued growth in domestic demand supported by higher consumer purchasing power. Mega beef processors in Brazil are implementing ?partnerships? with select groups of cattle growers to increase feedlot, thus supplying their needs for finished cattle along the year and avoiding shortfalls due to the ?dry season? period, mostly in the center-west regions of the country when pastures are not sufficient to increase cattle weight. Post revised downward its 2011 beef production because of a major drop in beef exports, combined with a shortage of finished cattle for slaughter. However, increased domestic consumption helped the sector from a further decline in production, as consumer purchasing power remained constant. Consumption: Beef consumption is estimated to increase in 2012 because of the rising domestic demand for animal proteins. Domestic demand for beef is supported by an estimated 33 million people who since 2003 have risen to the ranks of the so-called ?new middle class? or above. Today, 105 million Brazilians out of a total population of 195 million are categorized as members of this group. Trade: Post forecasts beef exports to rebound by 5 percent in 2012 as Brazilian beef exporters estimated a recovery in their major markets, such as Russia, Egypt, Hong Kong and Iran. Brazilian exporters believe that consumers in these countries will not suffer from the impact of the debt crisis in Europe and the United States and will be able to maintain their purchasing power. They also expect a continued recovery, although at a slower pace, in the European beef market as more Brazilian cattle farms are enrolled in its traceability program. Currently, the total number of farms enrolled is estimated at 2,200 as compared to 15,500 in 2008, according to a recent release by the trade association. In addition, they also expect a recovery in processed beef exports to the United States after a major decline in 2010-11 because of the Ivermectin residue issue. Post revised beef exports in 2011 to reflect new estimates made by our trade sources. The drop in 2011 beef exports is due to several factors, such as: the political crisis in the middle-east countries, particularly Egypt, the valuation of the Brazilian currency, and more recently the Russian ban, although beef was the least affected compared to pork and poultry. Trade sources also mentioned the impact of the Ivermectin issue with the United States, which had a long term effect by reducing exports of processed beef by more than 50 percent. The value of exports in 2011, however, is expected to increase Page 5 by over 30 percent despite the complaints valuation of the Brazilian currency which affects export profitability. Note: Differences between export data reported by Brazilian trade sources and those used by Post are due to the use of different conversion factors. Brazilian sources use a 2.5 percent factor for conversion of processed beef into Carcass Weight Equivalent (CWE), while post uses 1.79. The same applies for boneless beef, as Post uses 1.40 as the conversion factor, while Brazilian trade sources use 1.36. In addition, and as per FAS reporting instructions, variety meats (beef offals), HTS 0206 are not included for reporting purposes in our PSD and Trade Matrix tables. Page 6 Production, Supply and Demand Data Statistics: Mea t, Beef and Veal B 2010 2011 2012 razil Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: 2010 2011 Jan 2012 USDA USDA O New Post w Post fficial O New Post Nefficial Slaughter (Reference) 39,400 39,400 40,150 39,390 39,785 (1000 HEAD) Beginning Stocks 0 0 0 0 0 (1000 MT CWE) Production 9,115 9,115 9,365 9,030 9,210 (1000 MT CWE) Intra-EU Imports 0 0 0 0 0 (1000 MT CWE) Other Imports 35 35 45 45 55 (1000 MT CWE) Total Imports 35 35 45 45 55 (1000 MT CWE) Total Supply 9,150 9,150 9,410 9,075 9,265 (1000 MT CWE) Intra EU Exports 0 0 0 0 0 (1000 MT CWE) Other Exports 1,558 1,558 1,600 1,370 1,440 (1000 MT CWE) Total Exports 1,558 1,558 1,600 1,370 1,440 (1000 MT CWE) Human Dom. 7,592 7,592 7,810 7,705 7,825 (1000 MT CWE) Consumption Other Use, Losses 0 0 0 0 0 (1000 MT CWE) Total Dom. Consumption 7,592 7,592 7,810 7,705 7,825 (1000 MT CWE) Ending Stocks 0 0 0 0 0 (1000 MT CWE) Total Distribution 9,150 9,150 9,410 9,075 9,265 (1000 MT CWE) Note: Differences between export data reported by Brazilian trade sources and those used by Post are due to the use of different conversion factors. Brazilian sources use a 2.5 percent factor for conversion of processed beef into Carcass Weight Equivalent (CWE), while post uses 1.79. The same applies for boneless beef, as Post uses 1.40 as the conversion factor, while Brazilian trade sources use 1.36. In addition, and as per FAS reporting instructions, variety meats (beef offals), HTS 0206 are not included for reporting purposes in our PSD and Trade Matrix tables. Page 7 Import Trade Matrix Country Brazil Commodity Meat, Beef and Veal Time Period Jan-Jun Units: Metric Tons Imports for: 2010 2011 U.S . 0 U.S. 0 Others Others Argen tina 3,914 3,341 Paraguay 2,710 4,310 Uruguay 4,743 5,719 Total for Others 11,367 13,370 O thers not Listed 114 561 Grand Total 11,481 13,931 HTS: 0201,0202,0210 20,160250 Quant ity in Product Weight Equivalent (PWE) Updated: July 25, 2011 Page 8 Export Trade Matrix Country Brazil Commodity Meat, Beef and Veal Time Period Jan-Jun Units: Metric Tons 2010 2011 U.S . 13,534 U.S. 3,005 Others Others Ango la 5,085 6,140 Algeria 22,253 3,572 Canada 1,796 1,373 Chile 7,416 8,637 Egypt 48,182 35,253 European Union 56,449 47,470 Hong Kong 47,433 28,959 Iran 94,948 75,821 Iraq 1,771 2,380 Israel 15,372 11,362 Lebanon 11,158 7,589 Libya 8,304 3,442 Japan 1,743 1,903 Jordan 5,758 4,059 Phillippines 7,636 4,623 Russia 138,118 143,002 Saudi Arabia 18,023 17,400 Singapore 2,329 3,698 Ukraine 1,655 1,466 UEA 5,675 4,468 Venezuela 20,769 26,562 Total for Others 521,873 439,179 O thers not Listed 24,210 18,674 Grand Total 559,617 460,858 HTS:0201 ,0202,021020,160250 Quant ity in Product Weight Equivalent (PWE) Updated: July 25, 2011 Page 9 Commodities: Meat, Swine Production: Post forecasts pig production to increase by only one percent in 2012 supported mostly by the demand from the domestic market. Our forecast reflects current concerns of swine producers with the uncertainties regarding the Russian market. The price of live hogs already declined by an average 20 percent in August 2011 and several producers are being forced out of business due to their higher concentration of slaughter destined to the Russian market. Swine producers are also asking the government in the most important producing states to exempt their energy costs from the state sales tax as a mean to alleviate their current problems derived from the halt of exports to the Russian market and higher costs of inputs this year. Swine producers also have requested the government to extend their debts regarding their loans for production credit during 2010/2011. Commodities: Meat, Pork Production Post forecasts pork production to increase by two percent in 2012. The increase in production is mostly supported by domestic demand for pork, since there is a current pessimism among pork exporters that exports will continue to drop next year. According to a recent release by the trade association, the sector is concerned about the negative impact of the current Russia delisting of Brazilian plants in the most important producing states of South?s Brazil. According to the association, contrary to beef and poultry, the pork industry was mostly affected by the Russian delisting of Brazilian processors. Their expectations are that the Russians will drag on with the relisting of plants for an undetermined period of time. The pork council continues with a strong public campaign to increase consumption of pork in the domestic market and believes that the price of major pork cuts will be more competitive next year in relation to other types of meats. Consumption The Brazilian Association of Swine Producers (ABCS) entered into an agreement with the number one supermarket chain in Brazil to promote at the national level the largest marketing campaign ever conducted in Brazil to increase consumption of fresh pork. The new marketing campaign follows the success of the 2008 pilot campaign ?Swine Meat: A New Look?, which contributed to increase the consumption of fresh pork in Brazil as compared to a high concentration of consumption among processed products. Page 10 As of August 2011, retail pork prices are competitive with beef because of lower pork exports in July due to the Russian ban, which helps to foster pork consumption among the new Brazilian middle class. Trade Post forecasts pork exports to drop by one percent in 2012. Our forecast is based on the recent increase of Brazilian plant delisted by the Russians and the difficulties the Brazilian government have to resolve the issue. In addition, there are some uncertainties also in other markets, such as Argentina, as producers from that country stopped access of the Brazilian product in the border, although this act did not prevent an increase in imports from Brazil in 2011. However, exporters in Brazil are concerned with an election year in Argentina in 2012 and expect constraints ahead. Brazilian pork exports in 2011 are estimated to decline by 6 percent due to the severity of the delisting of Brazilian pork slaughter plants by Russian officials. Page 11 Production, Supply and Demand Data Statistics: An imal Numbers, Swine Br 2010 2011 2012 azil Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: 2010 2011 Jan 2012 USDA SDA O New P U ost fficial O New Post New Post fficial Total Beginning Stocks 35,122 35,122 36,947 36,947 39,543 (1000 HEAD) Sow Beginning Stocks 2,890 2,890 2,860 2,860 2,840 (1000 HEAD) Production (Pig Crop) 37,265 37,265 38,450 38,450 38,835 (1000 HEAD) Intra-EU Imports 0 0 0 0 0 (1000 HEAD) Other Imports 0 0 0 0 0 (1000 HEAD) Total Imports 0 0 0 0 0 (1000 HEAD) Total Supply 72,387 72,387 75,397 75,397 78,378 (1000 HEAD) Intra EU Exports 0 0 0 0 0 (1000 HEAD) Other Exports 0 0 0 0 0 (1000 HEAD) Total Exports 0 0 0 0 0 (1000 HEAD) Sow Slaughter 90 90 80 80 80 (1000 HEAD) Other Slaughter 34,200 34,200 34,920 34,724 35,246 (1000 HEAD) Total Slaughter 34,290 34,290 35,000 34,804 35,326 (1000 HEAD) Loss 1,150 1,150 1,050 1,050 1,100 (1000 HEAD) Ending Inventories 36,947 36,947 39,347 39,543 41,952 (1000 HEAD) Total Distribution 72,387 72,387 75,397 75,397 78,378 (1000 HEAD) Page 12 Mea t, Swine B 2010 2011 2012 razil Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: 2010 2011 Jan 2012 USDA O N USDA ew Post New Post New Post fficial Official Slaughter (Reference) 34,290 34,290 35,000 34,804 35,326 (1000 HEAD) Beginning Stocks 0 0 0 0 0 (1000 MT CWE) Production 3,195 3,195 3,275 3,227 3,295 (1000 MT CWE) Intra-EU Imports 0 0 0 0 0 (1000 MT CWE) Other Imports 1 0 1 0 0 (1000 MT CWE) Total Imports 1 1 1 0 0 (1000 MT CWE) Total Supply 3,196 3,196 3,276 3,227 3,295 (1000 MT CWE) Intra EU Exports 0 0 0 0 0 (1000 MT CWE) Other Exports 619 619 630 582 575 (1000 MT CWE) Total Exports 619 619 630 582 575 (1000 MT CWE) Human Dom. 2,577 2,576 2,646 2,645 2,720 (1000 MT CWE) Consumption Other Use, Losses 0 0 0 0 0 (1000 MT CWE) Total Dom. Consumption 2,577 2,577 2,646 2,645 2,720 (1000 MT CWE) Ending Stocks 0 0 0 0 0 (1000 MT CWE) Total Distribution 3,196 3,196 3,276 3,227 3,295 (1000 MT CWE) Page 13 Export Trade Matrix Country Brazil Commodity Meat, Swine Time Period Jan-Jun Units: Metric Tons Exports for: 2010 2011 U.S . 0 U.S. 0 Others Others Alban ia 2,318 4,210 Angola 10,079 13,172 Argentina 13,310 17,454 Armenia 1,413 2,033 Azerbaijan 386 1,821 Chile 1,027 1,875 European Union 127 23 Georgia 1,442 2,473 Kazakhstan 1,970 572 Hong Kong 35,138 35,238 Moldova 4,164 723 Russia 120,519 107,174 Singapore 12,889 12,939 South Africa 81 71 UAE 2,993 3,010 Ukraine 20,184 17,846 Uruguay 5,396 6,464 Venezuela 0 0 Total for Others 233,436 227,098 O thers not Listed 4,845 7,720 Grand Total 238,281 234,818 HTS: 020311,020312 ,020319,020 321,02032 2,020329, and 021011,021012,021019,160241,160242,160249 Quantity in Product Weight Equivalent (PWE) Updated: July 25, 2011 Page 14
Posted: 29 September 2011, last updated 29 September 2011

See more from Cattle in Brazil

Expert Views    
Annual Livestock Report 2011   By Foreign Agricultural Service
Annual Livestock Report 2012   By Foreign Agricultural Service
Livestock and Products Semi-annual   By Foreign Agricultural Service
Latest News    
2011 Trade Successes and 2012 Trade Priorities   By Foreign Agricultural Service