Pork Commentary: Brazil Trip - Second Week

by 5m Editor
26 May 2010, at 6:06am

BRAZIL - Our trip in Brazil continued last week. This time was spent visiting integrators and producers, writes Jim Long, President and CEO of Genesus Inc.

Some Observations:

  • We were in the south of Brazil it is fall on their side of the equator (similar to our November). Temperatures were approximately 50°F/10°C. It rained a lot. Maybe 10 inches (250 mm). The worst rain since 1991. There were landslides across roads and some roads were blocked. A major north–south four-lane highway was closed for several hours. The terrain is hilly – more like Tennessee – Kentucky hill country. In our 700-mile (1100-km) journey, there were areas of flat crop land but not much. The flat land is to the north from where we were.

  • The southern three states of Brazil were infused a little more than 100 years ago by German and Italian immigrants. Many still speak the tongue of their ancestors. The livestock industry in southern Brazil is dominated by the predecessors of these immigrants. They seem to have the livestock husbandry gene that we also see in North America from this ethnic group.

  • We toured some farms in Brazil. To sum it up, we say excellent management. One unit was hovering around 30 pigs weaned. The extra labour that is available is quite indicative for low pre–weaning mortality. Good workers are costing with benefits approximately US$7,500 per year. Top end production managers $25,000 per year. In North America, where we would have 18 employees, we saw 26 in Brazil. Labour cost per pig is significantly lower in Brazil. All costs in to produce an early wean pig was under $25, cost of production farrow to finish was approximately 45 US cents per pound live weight ($1.00 per kg).

  • Brazil’s producers really concentrate on feed conversion. The use pelleted feed to that end. From 45 to 260 pounds (22 to 117kg), 2.35 feed conversion. It is from intensity of management not genetics. The swine genetic suppliers in Brazil are the same usual suspects as in North America. Brazil’s excellent feed conversion is being accomplished by their management not by some magical genetic discovery. This goes to show what proper feeder adjustment can do if intensely targeted.

  • Brazil is officially free of PRRS. This of course helps production. Mycoplasma appears to be widespread. Most if not all were surprised the Genesus Genetic system of 28,000 sows in North America were free of both PRRS and Mycoplasma.

  • The chemical castration vaccine from Pfizer, Improvac, is legal in Brazil. Some integrators are using the vaccine program in lay terms shrivels the testicles. They then slaughter the boars at no discount and supposedly the boars grow faster, are leaner and have better feed conversion. It appears to us companies that slaughter their own pigs are using at a cost of about US$5.00 per pig for vaccine. One large producer we visited told us their own trials could not justify the $5.00 per pig cost. It will be interesting how this Pfizer product plays out in North America. Some North American packers have told us they have little interest in trying to sell benefits to retailers. They see pressure for less antibiotics and additives and trying to explain chemical castration opens up discussions best left alone. Time will tell at $5.00 per pig for Pfizer there is little wonder they are working hard to get approval. Simple arithmetic: 60,000 million male pigs North America times $5.00 = $300 million a year. Always follow the money trail.

  • Brazil’s swine price is about 2.21 Reals per kilo (55 US cents live weight). Cost of production is 45 US cents per pound. Producers should be making give or take $20 to $25 per head.

  • The producers and integrators we talked to in Brazil expect expansion over the next few years. Some expect one million more sows over the next ten years. There appears to be an aggressive and strong belief in Brazil for swine production. This despite relatively low per capita pork consumption of 13kg but the belief is as domestic per capita income increases for the 200 million people in Brazil so will pork consumption. 200 million people times a few more kilograms of pork equals a lot of hogs. The 'go to' attitude of the future seems to contrast with what we believe is the prevailing mood of no expansion sentiment in North America. We are not sure why the difference in mood. We see no major structural and cost advantage between the two areas. Over the last two and a half years, both areas have lost significant amounts of money.

Bottom line: Good producers Brazil; good producers North America; similar cost of production. To stay competitive one has to continue to up their game!

Quote of the week:

Evo Morales the President of Bolivia was quoted last week: “When I talk about chicken… the chicken we eat is full of feminine hormones. That’s why men, when they eat chicken, they have deviations in their beings as men. No to chicken, yes to pork and vegetables”.

Dare to say chicken producers in South America are not amused.