Brazil Livestock and Products Semi Annual Report 2008

Beef production in Brazil is estimated to increase in 2008 by 2.5 percent, a lower rate than last year, while beef exports are expected to drop by 5 percent in volume, because of the new restrictions imposed by the European Union, according to the USDA Foreign Agricultural Service. However, strong domestic demand and exports to new markets likely will offset most of the export losses to the European Union. Post also projects pork production and exports to increase in 2008 because of firm export and domestic demand.

4 April 2008

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Executive Summary

Post revised production and trade for Brazilian beef in 2008 to reflect new estimates made by trade sources. Beef production likely will continue to increase, but at a lower rate than last year, and it likely will be mostly driven by strong domestic demand. Beef exports are expected to drop in volume in 2008, because of new restrictions imposed by the European Union, although Brazilian exporters are redirecting their exports to new and diversified markets overseas. Post also projects pork production and exports to increase in 2008 because of firm export and domestic demand. In addition, higher hog prices have improved the profit margins of producers.

The outlook for the Brazilian economy also supports higher domestic demand for animal protein in 2008, as consumers’ real income is expected to continue to increase in 2008, along with an economic growth near 5 percent, despite current world economic uncertainties. However, there are some concerns among economic analysts about higher consumer prices for animal proteins due to the impact of ethanol production on world feed prices, even though Brazil’s 2007-08 corn and soybean crops are projected to break record levels. In addition, the Brazilian cattle cycle is beginning an upward price cycle due to the high levels of cow slaughter in recent years. This is also projected to impact packers’ profitability and possibly retail beef prices in the next year.

Commodity Outlook, Hogs and Pork

Production

Post revised pork production to increase by 4 percent in 2008 due to continued higher export demand combined with firm domestic demand in view of the higher purchasing power of Brazilian consumers. Higher returns to hog producers are also contributing to higher production.

Trade

Pork exports are also expected to continue to increase in 2008 due to continued firm demand from the world market, including Russia. Our trade sources are focusing on new markets in Asia, such as China, and began to advocate for access to the United States market.

Review of 2007 Pork Exports

Brazilian pork exports in 2007, including variety pork cuts, increased by 15 percent in volume (591,109 metric tons versus 514,392 metric tons - PWE in 2006) and 11 percent in value (US$ 1.0 billion, versus US$ 1.2 billion in 2005). The average export price increased by 18 percent over the previous year.

Russia remains as the main market for Brazilian pork exports, although Russia’s market share of Brazilian pork imports declined from 52 to 48 percent. This is the third consecutive drop in Russia’s import share of Brazilian pork. Hong Kong is the second largest Brazilian market for pork exports with 15 percent market share, up 25 percent from the previous year. Ukraine is the third largest market for Brazilian pork exports, with a 10 percent market share, about the same as the previous year. Angola and Albania are increasing potential markets for Brazilian pork.