Annual Livestock Report 2012

An Expert's View about Cattle in Brazil

Posted on: 21 Sep 2012

Post forecasts beef and pork production to increase by over two percent in 2013 supported mostly by strong international demand.

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: 9/6/2012 GAIN Report Number: BR 0819 Brazil Livestock and Products Annual Annual Livestock Report 2012 Approved By: Robert Hoff, Agricultural Counselor Prepared By: Joao F. Silva, Agricultural Specialist Report Highlights: Post forecasts beef and pork production to increase by over two percent in 2013 supported mostly by strong international demand. The devaluation of the Brazilian currency in 2012 will improve the competitiveness of Brazilian product in overseas markets, but sluggish domestic demand will moderate consumption. In addition, consumption of animal protein in Brazil is facing a new constraint that combines higher retail prices of meats due to higher costs of production and high indebtedness of Brazilian consumers. As shown by recent data, debt payments eat up over 46 percent of the household income in Brazil. Page 1 Executive Summary: Post forecasts beef and pork production to increase by over two percent in 2013. In recent years, in general, domestic demand for both meats supported the expansion in beef and pork production in Brazil. However, trade sources believe that an increase in production next year will come from international as opposed to domestic demand. Consumption of animal protein in Brazil is facing a new constraint that combines higher retail prices of meats due to higher costs of production and high indebtedness of Brazilian consumers. As shown by recent data, debt payments eat up over 46 percent of the household income in Brazil. Commodities: Animal Numbers, Cattle Production: Post forecasts an increase of three percent in cattle inventories in 2013, mostly due to government financial support for cattle herd rebuilding, genetic improvements, upgrades in pasture land, and sustained cattle prices. Thus, cattle inventories are expected to reach nearly 210 million head by the end of the year. The recently announced Crop and Livestock Plan for the 2012-13 marketing year (Oct 1, 2012- September 30, 2013) provides a total of R$ 115.2 billion (US$ 58 billion), at subsidized interest rates allocated for commercial and export-oriented agriculture, including R$ 750,000 (US$ 375,000), per cattle producer for pasture renovation and herd rebuilding through genetic improvement. The program requires a five-year payment with a18 month grace period. In addition, large beef packers are also increasing financing for their cattle suppliers, similar to the financing available for the chicken and pork production integration system. In addition, cattle producers can benefit from the Low Carbon Agriculture Program (ABC), with a subsidized interest rate of 5.5 percent per year, to implement the integration of crop-livestock-forest program (iLPF). Although in 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: Page 2 Post forecasts an increase of 20 percent in cattle exports during 2013 due mostly to higher exports to Venezuela and competitive cattle prices from Brazil. The Brazilian Meat Packing Industry officially submitted to the federal government on January 31, 2012, a request for a 30 percent export tax on live cattle exports, but the government has not taken a decision on this issue. Production, Supply and Demand Data Statistics: Animal Numbers, Ca ttle - B 2011 2012 2013 razil M Market Year Begin: Jan a rket Year Begin: Jan 2011 Market Year Begin: Jan 2012 2013 USDA O N USDA ew Post N A ew P USDost fficial Official O New Post fficial Total Cattle Beg. Stks 190,925 190,925 197,550 197,550 203,717 (1000 HEAD) Dairy Cows Beg. Stocks 38,185 38,185 39,510 39,510 40,695 (1000 HEAD) Beef Cows Beg. Stocks 53,458 53,458 55,230 55,230 56,890 (1000 HEAD) Production (Calf Crop) 49,445 49,445 49,690 49,690 50,185 (1000 HEAD) Total Imports 5 5 15 2 2 (1000 HEAD) Total Supply 240,375 240,375 247,255 247,242 253,904 (1000 HEAD) Total Exports 405 405 500 490 590 (1000 HEAD) Cow Slaughter 10,750 10,750 10,750 10,750 10,780 (1000 HEAD) Calf Slaughter 300 300 300 300 300 (1000 HEAD) Other Slaughter 28,050 28,050 28,735 28,735 29,302 (1000 HEAD) Total Slaughter 39,100 39,100 39,785 39,785 40,382 (1000 HEAD) Loss 3,320 3,320 3,250 3,250 3,220 (1000 HEAD) Ending Inventories 197,550 197,550 203,720 203,717 209,712 (1000 HEAD) Total Distribution 240,375 240,375 247,255 247,242 253,904 (1000 HEAD) CY Imp. from U.S. 0 0 0 0 0 (1000 HEAD) CY. Exp. to U.S. 0 0 0 0 0 (1000 HEAD) Balance 0 0 0 0 0 (1000 HEAD) Inventory Balance 6,625 6,625 6,170 6,167 5,995 (1000 HEAD) Inventory Change 3 3 3 3 3 (PERCENT) Cow Change 3 3 0 0 0 (PERCENT) Production Change 0 0 0 0 1 (PERCENT) Production to Cows 54 54 52 52 51 (PERCENT) Slaughter to Inventory 20 20 20 20 20 (PERCENT) Slaughter to Total Supply 16 16 16 16 16 (PERCENT) TS=TD 0 0 0 Comments AGR Number Comments To Post Commodities: Page 3 Meat, Beef and Veal Production: Post forecasts that beef production will increase 2.5 percent in 2013 due mostly to international demand and a small increase in domestic demand. The devaluation of the Brazilian currency combined with higher cattle supplies is likely to maintain Brazilian beef at competitive prices in world markets in 2013. Profit margins for processors are forecast to improve due to higher availability of cattle supplies and improved competitiveness of Brazilian meat overseas due to the devaluation of the Brazilian currency by over 10 percent in 2012. Trade: Post projects an increase of beef exports of eight percent or more in 2013, as Brazilian beef exporters are optimistic about recovering exports to the Russian Federation, despite the slow re-listing process of Brazilian plants. Post also anticipates shipments to other markets such as Egypt, China, Chile, Cuba, Iraq, and Morocco. Despite the financial crisis in the European Union (EU), exporters also expect to increase exports to that market because more Brazilian cattle farms are enrolled in the EU’s traceability program due to the flexibility in the Normative Instruction # 61 allowed by the European Union. In addition, Post also expects a continued recovery in processed beef exports to the United States. Trade sources also posit that the devaluation of the Brazilian currency and stable cattle prices due to higher supplies of animals for slaughter will improve the competitiveness of Brazilian beef overseas. 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 4 Policy: According to trade sources, officials from the Russian Federation are threatening to ban imports of Brazilian meat exports due to the use of Ractopamine. However, Brazilian officials have not received any official note from the government of the Russian Federation concerning this possibility. Also, the EU is threatening to restrict Brazilian meat exports due to the approval by the Brazilian government of zilparetol and ractopamine. The GOB is elaborating a segregation plan to present to the EU officials. In the meantime, the GOB has entered into an agreement with the two U.S. companies producing those additives to refrain from selling these products in the Brazilian market until the plan is executed. Page 5 Production, Supply and Demand Data Statistics: Meat, Beef and Veal - 2011 2012 2013 Brazil M Market Year Begin: Jan a rket Year Begin: Jan 2011 Market Year Begin: Jan 2012 2013 USDA USDA Official New Post USDA Official New Post Officia New Post l Slaughter 39,100 39,100 39,785 39,785 40,382 (1000 HEAD) (Reference) Beginning 0 0 0 0 0 (1000 MT Stocks CWE) Production 9,030 9,030 9,210 9,210 9,440 (1000 MT CWE) Total 40 40 60 60 60 (1000 MT Imports CWE) Total Supply 9,070 9,070 9,270 9,270 9,500 (1000 MT CWE) Total 1,340 1,340 1,350 1,394 1,520 (1000 MT Exports CWE) Human 7,730 7,730 7,920 7,876 7,980 (1000 MT Dom. CWE) Consumptio n Other Use, 0 0 0 0 0 (1000 MT Losses CWE) Total Dom. 7,730 7,730 7,920 7,876 7,980 (1000 MT Consumptio CWE) n Ending 0 0 0 0 0 (1000 MT Stocks CWE) Total 9,070 9,070 9,270 9,270 9,500 (1000 MT Distribution CWE) CY Imp. 0 0 0 0 0 (1000 MT from U.S. CWE) CY. Exp. to 65 65 0 42 62 (1000 MT U.S. CWE) Balance 0 0 0 0 0 (1000 MT CWE) Inventory 0 0 0 0 0 (1000 MT Balance CWE) Weights 231 231 231 231 234 (1000 MT CWE) Production -1 -1 2 2 2 (PERCENT) Change Import 14 14 50 50 0 (PERCENT) Change Export -14 -14 1 4 9 (PERCENT) Change Consumptio 2 2 2 2 1 (PERCENT) n Change Imports 1 1 1 1 1 (PERCENT) Percent Consumptio n Exports 15 15 15 15 16 (PERCENT) Percent Production Population 2 0 3 ,429,77 203,429,77 205,716,89 205,716,89 207,964,53 (PEOPLE) 3 3 0 0 1 Per Capita 38 38 (KG) Consumptio n Page 6 TS=TD 0 0 0 Comments AGR Number Comments To Post Page 7 Brazil Commodity Meat, Beef and Veal Time Period Jan-Jun Units: Metric Tons Imports for: 2011 2012 U.S . 0 U.S. 0 Others Others Argen tina 3,341 3,437 Paraguay 4,310 8,290 Uruguay 5,719 5,979 Australia 557 828 Total for Others 13,927 18,534 O thers not Listed 4 99 Grand Total 13,931 18,633 HTS: 0201,0202,0210 20,160250 Quant ity in Product Weight Equivalent (PWE) Updated August 15, 2012 Page 8 Export Trade Matrix Country: Brazil Commodity: Meat, Beef T ime Period Jan-Jun Units: Metric Tons 2011 2012 U .S. 3,045 U.S. 8,610 Others Others Ango la 6,140 6,211 Algeria 3,572 5,690 Canada 1,373 1,262 Chile 8,637 29,555 Egypt 35,253 51,680 European Union 47,470 47,765 Hong Kong 28,959 42,916 Iran 75,821 8,601 Iraq 2,380 3,056 Israel 11,362 7,140 Lebanon 7,589 6,388 Libya 3,442 9,054 Japan 1,903 494 Jordan 4,059 5,708 Phillippines 4,623 2,268 Russia 143,002 137,717 Saudi Arabia 17,400 19,770 Singapore 3,698 2,479 Ukraine 1,466 1,752 UEA 4,468 4,693 Venezuela 26,562 41,664 Total for Others 439,179 435,863 O thers not Listed 18,634 23,524 Grand Total 460,858 467,997 HTS:0201,0202,02102 0,160250 Quant ity in Product Weight Equivalent (PWE) Updated August 15, 2012 Page 9 Commodities: Meat, Swine Production: Post forecasts pig production to increase by one percent in 2013 supported mostly by international demand. Post’s forecast reflects current concerns of swine producers with the uncertainties regarding the higher feed costs. Despite the government programs of subsidized corn sales, independent producers are expected to suffer most from the increase in their cost of production. Swine producers in the most important producing areas have asked and received from state governments an exemption on the state sales tax on energy as a means to alleviate their current problems derived from the increase in production costs. Swine producers also have requested and obtained from the government an extended grace period for their debts from production credit loans during 2011/2012. Commodities: Meat, Pork Production Post forecasts pork production in 2013 to increase by nearly two percent. This forecast reflects the current optimism of the pork industry with a continued recovery in export markets. However, a major factor of concern for hog producers is the recent increase in feed prices, mostly corn-based feed. According to the association of pork producers the increase in corn prices could squeeze their margins, although the GOB has already intervened in the market with subsidized corn auctions to protect the industry, has extended deadlines for credit payments, and has temporarily suspended state taxes. Trade: Post forecasts pork exports to increase by seven percent or more in 2013. Post’s forecast reflects current optimism of Brazilian exporters with the devaluation of the Brazilian currency and firm demand from major importers, mostly Hong Kong, Ukraine, Angola, Argentina and Singapore. Brazilian pork exporters are also strategically focused on two new markets: China and Japan. The first pork shipments to China occurred in January 2012 and totaled 52 metric tons. Trade sources believe that exports to China will only be significant in 2013. Page 10 Pork exports to Japan. After five years, on August 27, 2012 the Ministry of Agriculture, Fisheries and Forestry of Japan concluded the risk analysis for Brazilian pork imports from the state of Santa Catarina. The two countries still need to negotiate the requirements for the international health certificate (CSI, in Portuguese) and plant approvals. Japanese officials believe that within 60 days the process could be completed, but Brazilian trade sources believe that the process will not be completed until early next year. In fact, only in late November will a team from Japan visit the state of Santa Catarina. The current forecast for pork exports to Japan after the final approval of all requirements varies from 10 to 15 percent of Japan imports estimated at 1.2 million metric tons, or 120,000 to 180,000 metric tons of Brazilian pork per year. However, more realistic estimates by some trade sources concluded that in 2013 Brazil could export two to three percent to Japan (between 24,000 and 36,000 metric tons) and in the near future, could increase exports to ten percent (120,000 metric tons). Page 11 Production, Supply and Demand Data Statistics: An imal Numbers, Swine - B 2011 2012 2013 razil Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: Jan 2011 2012 2013 USDA New USDA New USDA New Official Post Official Post Official Post Total Beginning Stocks 36,652 36,652 38,336 38,336 39,276 (1000 HEAD) Sow Beginning Stocks 2,925 2,925 2,900 2,920 2,915 (1000 HEAD) Production (Pig Crop) 37,750 37,750 37,700 37,700 38,080 (1000 HEAD) Total Imports 2 2 1 1 1 (1000 HEAD) Total Supply 74,404 74,404 76,037 76,037 77,357 (1000 HEAD) Total Exports 6 6 8 1 1 (1000 HEAD) Sow Slaughter 95 95 120 150 150 (1000 HEAD) Other Slaughter 34,767 34,767 35,686 35,410 36,660 (1000 HEAD) Total Slaughter 34,862 34,862 35,806 35,560 36,810 (1000 HEAD) Loss 1,200 1,200 1,200 1,200 1,200 (1000 HEAD) Ending Inventories 38,336 38,336 39,023 39,276 39,346 (1000 HEAD) Total Distribution 74,404 74,404 76,037 76,037 77,357 (1000 HEAD) CY Imp. from U.S. 0 0 0 0 0 (1000 HEAD) CY. Exp. to U.S. 0 0 0 0 0 (1000 HEAD) Balance 0 0 0 0 0 (1000 HEAD) Inventory Balance 1,684 1,684 687 940 70 (1000 HEAD) Inventory Change 4 4 5 5 2 (PERCENT) Sow Change 1 1 -1 0 0 (PERCENT) Production Change 2 2 0 0 1 (PERCENT) Production to Sows 13. 12.9 13. 12.9 13.1 (PERCENT) Slaughter to Inventory 95 95 93 93 94 (PERCENT) Slaughter to Total Supply 47 47 47 47 48 (PERCENT) TS=TD 0 0 0 Comments AGR Number Comments To Post Page 12 Production, Supply and Demand Data Statistics: Mea t, Swine B 2011 2012 2013 razil M Market Year Begin: Jan a rket Year Begin: Jan 2011 Market Year Begin: Jan 2012 2013 USDA USDA Official New Post USDA Official New Post Officia New Post l Slaughter 34,862 34,862 35,806 35,560 36,810 (1000 HEAD) (Reference) Beginning 0 0 0 0 0 (1000 MT Stocks CWE) Production 3,227 3,227 3,311 3,260 3,330 (1000 MT CWE) Total 1 1 1 1 1 (1000 MT Imports CWE) Total Supply 3,228 3,228 3,312 3,261 3,331 (1000 MT CWE) Total 584 584 615 603 645 (1000 MT Exports CWE) Human 2,644 2,644 2,697 2,658 2,686 (1000 MT Dom. CWE) Consumptio n Other Use, 0 0 0 0 0 (1000 MT Losses CWE) Total Dom. 2,644 2,644 2,697 2,658 2,686 (1000 MT Consumptio CWE) n Ending 0 0 0 0 0 (1000 MT Stocks CWE) Total 3,228 3,228 3,312 3,261 3,331 (1000 MT Distribution CWE) CY Imp. 0 0 0 1 5 (1000 MT from U.S. CWE) CY. Exp. to 0 0 0 0 0 (1000 MT U.S. CWE) Balance 0 0 0 0 0 (1000 MT CWE) Inventory 0 0 0 0 0 (1000 MT Balance CWE) Weights 93 93 92 92 90 (1000 MT CWE) Production 1 1 3 1 2 (PERCENT) Change Import 0 0 0 0 0 (PERCENT) Change Export -6 -6 5 3 7 (PERCENT) Change Consumptio 3 3 2 1 1 (PERCENT) n Change Imports 0 0 0 0 0 (PERCENT) Percent Consumptio n Exports 18 18 19 18 19 (PERCENT) Percent Production Population 2 0 3 ,429,77 203,429,77 205,716,89 205,716,89 207,964,53 (PEOPLE) 3 3 0 0 1 Per Capita 13 13 (KG) Consumptio n TS=TD 0 0 0 Page 13 Comments AGR Number Comments To Post Page 14 Export Trade Matrix Country – Brazil Commodity Meat, Swine Time Period Jan-Jun Units: Metric Tons Exports for: 2011 2012 U.S . 0 U.S. 0 Others Others Alban ia 4,210 1,761 Angola 13,172 13,836 Argentina 17,454 5,909 Armenia 2,033 3,495 Azerbaijan 1,821 1,190 China 0 1,481 Chile 1,875 1,751 Ecuador 1,701 1,338 European Union 0 0 Georgia 2,473 4,478 Kazakhstan 572 353 Haiti 1,704 2,235 Hong Kong 35,238 43,158 Moldova 723 1,008 Paraguay 522 809 Russia 107,174 55,380 Singapore 12,939 13,394 South Africa 71 59 UAE 3,010 2,798 Ukraine 17,846 64,131 Uruguay 6,464 10,527 Venezuela 0 0 Total for Others 231,002 229,091 O thers not Listed 3,816 3,765 Grand Total 234,818 232,856 HTS: 020311,020312,020319,020321,020322,020329, and 021011,021012,021019,160241,160242,160249 Quantity in Product Weight Equivalent (PWE) Updated August 15, 2012 Page 15
Posted: 21 September 2012

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