Post forecasts beef and pork production to increase by two per cent in 2012 and pork production to increase by less than one per cent 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.

Post forecasts pig production to increase by only one per cent 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 per cent 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.

Pork Production

Post forecasts pork production to increase by two per cent 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.

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 per cent 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 six per cent due to the severity of the delisting of Brazilian pork slaughter plants by Russian officials.

Further Reading

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