Poultry and Products Annual 2012

An Expert's View about Poultry in Brazil

Posted on: 31 Aug 2012

Post forecasts broiler production to rebound by 2 percent in 2013 to 13 million metric tons after a small decline in production in 2012.

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: 8/20/2012 GAIN Report Number: BR 0816 Brazil Poultry and Products Annual Annual Poultry Approved By: Robert Hoff, Agricultural Counselor Prepared By: João F. Silva, Agricultural Specialist Report Highlights: Post forecasts broiler production to rebound by 2 percent in 2013 to 13 million metric tons after a small decline in production in 2012. The Post forecast reflects a conservative estimate by our trade sources that the Brazilian economy will recover in 2013 and will improve domestic demand for animal protein. The export market is estimated to increase slowly next year based on higher exports to Asia and the Middle East. Post revised production and exports in 2012 to reflect the impact of rising feed costs in the poultry sector. Page 1 Executive Summary: Post forecasts broiler production to rebound by 2 percent in 2013 after a small decline estimated for 2012. The Post forecast reflects a general opinion among trade sources that Brazil’s economic growth is expected to recover in 2012 which will strengthen household income. Estimated record Brazilian soybean and corn crops should help to mitigate the impact of rising feed costs. However, Post sources also identify other concerns that can adversely affect the poultry sector in the coming year: a) Squeezed profit margins for producers and processors due to rising feed costs may continue through the first quarter of next year, and, b) The high level of consumer debt in Brazil may also undercut domestic demand of animal proteins in general. Broiler exports are also forecast to increase slowly because of the continued uncertainties in the world economy due to the debt crisis in Europe and in the United States. The outlook for turkey production and exports is for less growth than previous years. Commodities: Poultry, Meat, Broiler Production: Broiler production is forecast to grow by 2 percent in 2013, as compared to Post’s revised downward production level in 2012. FAS Brasilia believes that a production estimate at 13 million metric tons reflects the current expectations of trade sources with improved economic conditions next year and estimated record soybean and corn crops. In addition, the federal government will make use of several domestic support programs and will extend credit payment deadlines to assist broiler producers to reduce the impact of rising feed costs. However, there are some concerns that can impact next year’s forecasts: a) The current high grain and oilseed prices have squeezed producers’ profit margins this year and eventually will result in some small independent producers going out of business. This situation may continue throughout the first quarter of next year; b) A slowdown in the path of the growth of domestic consumption due to the high level of indebtedness of Brazilian consumers may reduce consumption of animal protein, and c) Current disappointing export performance due to the international economic uncertainties derived mostly from the European Union’s financial crisis and some trade issues, mostly with Russia and South Africa, could undercut the forecast. Post revised 2012 broiler production to 12.7 million metric tons, a small drop of one percent from 2011 reflecting the current problems faced by Brazilian producers with very high feed costs and their decision to cut production by 5 to 10 percent by the end of the year. Production Costs Page 2 The increase in the cost of broiler production for the period July 2011 and July 2012 was almost 33 percent, while the producer price during the same period increased by less than 5 percent. However, during the first two weeks of August 2012, reflecting the impact of rising feed costs, broiler prices have significantly increased by over 30 percent and most of the industry is passing on these price adjustments to consumers. Prices Sao Paulo: Broiler production costs and wholesale prices for broilers (RTC), corn, and soybean meal (Sao Paulo state), 2006-2011: Wholesale Prices Year Broiler Cost (US$/KG/Live Weight) Live Weight RTC Corn Soybean Meal (US$/KG) (US$/KG) (US$/KG) (US$/60/KG) 2006 0.54 0.54 0.65 8.00 0.21 2007 0.72 0.80 1.07 11.99 0.28 2008 0.97 0.89 1.27 13.89 0.39 2009 0.83 0.82 1.21 10.45 0.41 2010 0.87 0.94 2.02 12.14 0.36 2011 1.12 1.15 2.45 18.28 0.39 RTC= Ready to Cook Source: Trade Consumption: Domestic consumption of broiler meat in 2013 is project to increase by 1.6 percent to 9.4 million metric tons. Our estimate reflects a continuing increase in disposable income of Brazilian consumers, but includes new factors that will likely reduce the path of growth of domestic consumption of broilers: a) High indebtedness of Brazilian consumers, as shown by recent data that debt payments eat up over 46 of the household income in Brazil, and b) Competition from lowered beef prices. Trade: Post forecasts broiler exports in 2013 to rebound by 3 percent. The growth in exports is likely to be driven by higher sales of whole broilers, in general and chicken parts to China and Hong Kong in particular. Trade sources also expect higher exports to Egypt and Iraq. Brazilian exporters currently have three major concerns affecting the outlook for broiler exports in 2013: a) despite the recent devaluation of the Brazilian currency, higher production costs of broilers during the second half of 2012 and first half of 2013 are expected to impact on the cost of exports; b) uncertainties derived from the world financial crisis, mostly in Europe, and its impact on importing markets will slow growth; and c) specific trade issues with major trading partners such as the Russian Federation (slow relisting of Brazilian poultry plants), Venezuela (payment defaults) and South Africa (application of antidumping Page 3 tariffs on Brazilian broiler of 62.92% on whole broilers and 46.59% on chicken parts) will negatively th affect performance. South Africa was the 7 largest market for Brazilian broiler exports in 2011 with 195,416 metric tons (PWE). Post updated trade data for Jan-Jun 2012 to include final official export numbers. Broiler export markets with major increases in 2012 were South Korea (+265%), followed by Egypt (+157%) and China (+42%). Brazilian meat inspection officials expect to more Brazilian plants added to the list of eligible exporters to China before the end of the year. Markets with major declines were Kuwait (-40%) followed by Bahrain (-31%), Venezuela (-26%), the European Union (-17%), Japan (-16%) and the Russian Federation (-14%). The decline in exports to Russia derived from the unresolved issue of delisted Brazilian poultry plants by Russian officials. The drop in exports to Venezuela is alleged to an increase in local broiler production in that country, but trade sources also indicated policy restrictions against Brazilian broiler imports were in place. Note: The PS&D table excludes chicken feet and paws exports to China and Hong Kong, as per USDA export methodology. Page 4 Production, Supply and Demand Data Statistics: Poultry, Meat, Broiler Brazil 2011 2012 2013 Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Market Year Begin: Jan 2013 USDA Official New Post USDA Official New Post USDA Official New Post Inventory (Reference) 54 54 55 53 54 Slaughter (Reference) 6,305 6,245 6,495 6,325 6,495 Beginning Stocks 0 0 0 0 0 Production 12,863 12,863 13,250 12,750 13,005 Total Imports 1 1 1 1 1 Total Supply 12,864 12,864 13,251 12,751 13,006 Total Exports 3,219 3,443 3,315 3,478 3,582 Human Consumption 9,645 9,421 9,936 9,273 9,424 Other Use, Losses 0 0 0 0 0 Total Dom. Consumption 9,645 9,421 9,936 9,273 9,424 Total Use 12,864 12,864 13,251 12,751 13,006 Ending Stocks 0 0 0 0 0 Total Distribution 12,864 12,864 13,251 12,751 13,006 MIL HEAD, 1000 MT, PERCENT, PEOPLE, KG Page 5 Export Trade Matrix Country Brazil Commodity Poultry, Mea t, Broiler Time Period Jan-Jun Units: Metric Tons Exports for: 2011 2012 U.S. 0 U.S. 0 Others Others Angola 40,054 37,621 Canada 8,082 5,997 China 83,201 118,463 Cuba 18,553 19,152 Egypt 28,570 73,441 European Union 154,249 137,079 Hong Kong 159,894 171,668 Ghana 18,570 18,290 Iran 30,138 4,024 Iraq 64,529 60,818 Japan 224,642 189,113 Jordan 14,338 21,720 Kuwait 95,492 56,827 Oman 26,792 23,578 Phillippines 10,751 14,591 Qatar 26,502 26,013 Russia 43,149 36,986 Romania 5,469 4,918 Saudi Arabia 296,872 294,278 Singapore 30,027 41,195 South Africa 100,926 98,503 South Korea 10,611 38,724 UAE 112,938 116,815 Yemen 26,221 38,313 Venezuela 75,465 55,998 Total for Others 1,706,035 1,704,125 O thers not Listed 135,306 198,354 Grand To tal 1,841,341 1,902,479 Note: Includes HTS Codes: 0207.11; 0207.12; 0207.13; 0207.14; and 1602.32. Quantity in Product Weight Equivalent (PWE) Updated August 6, 2012 Page 6 Commodities: Poultry, Meat, Turkey Production: Turkey production is project to increase by 2 percent in 2012. Rising feed costs combined with a slowdown in the path of growth of domestic demand are the main factors affecting production growth. Exports Turkey exports are project to continue to grow in 2013, but at a reduced path of growth as the European Union is likely to reduce imports from Brazil. Page 7 Production, Supply and Demand Data Statistics: Poultry, Meat, Turkey Brazil 2011 2012 2013 Market Year Begin: Jan 2011 Market Year Begin: Jan 2012 Market Year Begin: Jan 2013 USDA Official New Post USDA Official New Post USDA Official New Post Inventory (Reference) 0 0 0 0 0 Slaughter (Reference) 46 46 47 47 48 Beginning Stocks 0 0 0 0 0 Production 505 489 531 510 520 Total Imports 0 0 0 0 0 Total Supply 505 489 531 510 520 Total Exports 140 141 142 155 160 Human Consumption 365 348 389 355 360 Other Use, Losses 0 0 0 0 0 Total Dom. Consumption 365 348 389 355 360 Total Use 505 489 531 510 520 Ending Stocks 0 0 0 0 0 Total Distribution 505 489 531 510 520 MIL HEAD, 1000 MT, PERCENT, PEOPLE, KG Page 8 Export Trade Matrix Country Brazil Commodity Poultry, Me at, Turkey Time Period Jan-Jun Units: Metric Tons Exports for: 2011 2012 U.S. 0 U.S. 0 Others Others Angola 4,242 5,008 Argentina 422 27 Benin 4,752 8,671 Congo 2,117 2,295 Congo, D.R. 654 513 Gabon 967 861 Guinea, E. 1,475 1,525 European Union 33,852 39,301 Hong Kong 779 900 Peru 727 881 Russia 3,941 3,422 Saudi Arabia 655 544 South Africa 5,382 9,303 Switzerland 1,095 1,543 Total for Others 61,060 74,794 Others not Listed 3,383 3,305 Grand Total 64,443 78,099 Note: It includes HTS Codes: 02072400; 02 072500; 020 72600; 02072700; 16023100. Quantity in Product Weight Equivalent (PWE) Updated August 6, 2012 Page 9
Posted: 31 August 2012

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