High input costs put squeeze on Brazil meat producers

Processors eye shuttering some operations.

With input costs rising sharply, it looks like anything Brazilians put on their grills by the Sept. 9 independence holiday will cost a lot more.

Soy has been steadily elbowing main crop corn acres aside for years now, and a decidedly disappointing El Nino effect dried out the expanding second crop so that even though planted area was up 8%, yields nationwide were down 21%, according to a July government report. All that makes producing meat a costlier proposition, which, in turn raises supermarket costs.

In fact, government ag agency Embrapa estimates the cost of hog production inputs, like ration and premix, has shot up 15% for the year so far. Meanwhile broiler production costs are up more than 16% for the same period. Overall inflation during the same months of 2016, though, was estimated at 4.4% (annualized at 8.8%,) according to the government’s IPCA inflation index.

Some of that overall increase to Brazil’s pork and poultry producers can be blamed on inflation brought about by the shrinking value of the national currency, but the lion’s share is probably in the cost of feed rations.

State of emergency

Pork producers nationwide have been complaining, and a number of hog operations in Mato Grosso state are considering shutting down totally, at least temporarily, even though pork producers there enjoy some of the lowest corn prices in the country. Last Friday (July 8,) spot corn prices in Sapezal, Mato Grosso were $3.49 per bushel.

Down in Brazil’s southernmost state of Rio Grande do Sul, some producers are considering even more desperate measures, like requesting emergency federal takeover of their operations. By comparison, spot corn prices last Friday in Erechim, Rio Grande do Sul, were $5.41. Considering the national herd was counted at 37.9 million head for 2014, it’s a big problem. If you listen closely, you can hear the sound of all those pork sales desks frantically calling China.

Most of the Brazilian sales desk guys are now hurriedly thumb-typing the contact information of British buyers into their smart phones, as the Brazilian poultry sector may have a fair shot of picking up some business in a post-Brexit world.

As for Brazilian’s citizens, many may work a few more meatless meals into their mid-term menu plans, until the economy improves. And while nobody does rice-bean-dishes like the Brazilians, meatier fare may be saved for special occasions—like the cookout on Independence Day.

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