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Pork Commentary: Trip to Brazil

by 5m Editor
18 May 2010, at 5:21am

BRAZIL - This week, Jim Long writes, "This past week we were in Brazil attending and speaking at the Avesui Convention, presented by Gessulli Agribusiness, which was held in Florianópolis on the Atlantic island of Santa Catarina, just off the coast of Brazil."

Our observations

The Avesui Convention was organized by Gessulli Agribusiness. It was a first-class event. Weekly, www.avesui.com and www.genesus.com.br in Brazil publish the Jim Long Pork Commentary in Portuguese. By the number of people who stopped at the Genesus booth to say hello, it appears there are lots of people following our comments. Currently the price of market hogs in the South of Brazil is R$ 2.30 per live weight kg, or 59¢ US per live weight pound. Cost of production ranges around R$ 1.10 per kg, or 47-50¢ US per live weight pound. Profits are in the US$ 20 per head range. In southern Brazil, profits have just returned from about 18 months of losses which at times were up to US$40 per head. Due to the 18 months of financial crisis, there was sow liquidation. How much is anybody’s guess because there is no organized national inventory statistical service. We heard of up to 8 per cent liquidation, we also hear of 2 per cent. Bottom line: in the last while, prices went up about 15 per cent. Like America, the other big factor is feed prices which have dropped about 30 per cent in the last 6-8 months. Higher hog prices and lower feed prices have returned the Brazilian industry to the black. The industry guesstimate on current sow herd ranges up to 2.4 million sows if you include backyard hogs: 1.5 million sows in commercial herds and 900,000 sows in backyards, or what they term subsistence production. Brazil is the #4 hog producing area in the world, after China, EU-27 and USA. We spoke at the Avesui event. The following is the text of our speech when we specifically addressed Brazil.

Brazil

Dangerous subject for me Brazil - been here only once before. An expert from thousands of kilometers away with next to little real knowledge. The best we can do is giving a perspective from a far.

  • Brazil is a dynamic country. Everyone in the world can see the relentless increase in Brazil’s pork, beef, and poultry production. You have pounded your way into world markets with price and volume. Right or wrong, it is not perceived to be quality driven.

  • Brazil has large land base with large feed production with upside potential. A key factor in your country’s competitive pig cost of production is you have land to increase swine production.

  • Brazil from afar appears to have an image of a country with disease problems from ongoing foot and mouth situations. Some global meat brokers have told us they do not have utmost confidence in Brazil’s meat inspection protocols and procedures.

  • Our perception is that Brazil’s swine producers are technically sound and have globally competitive productivity. One of the outside perspectives is Brazil has less than ideal transportation system which increases cost and time. Perception also is that bank credit for agriculture is harder to get then North America.

  • Brazil’s pork exports are dominated by Russia (50 per cent approx.). Over time this market will decline as Russia moves to self-sufficiency.

  • Brazil’s ability to grow in swine production will depend on increasing domestic per capita consumption (13 kg) and development of new export markets. The challenges are there, they always are. Brazil has in our opinion a dynamic future in swine production. This belief in Brazil is manifested in our new association with Mr. Martin Riordan who is working with Genesus in Brazil to develop our genetic relationships.

After the speech we participated in a round-table discussion with the other speakers. During the different talks, there were several comments about the current state of the USA economy, banking system, etc. There appeared to be some inference that the US competitive ability was diminishing. Right or wrong, we addressed this.

The gist of our round-table reply:
“I am Canadian, not American, but at the risk of being rude I believe I need to address the peril of underestimating the USA. Number 1 globally in productivity, #1 in innovation, about 25 per cent of the world’s gross domestic product. Yes, there are deficits but it is the only country in the world that can print unlimited money and its currency goes up in value. With next to no inflation. Never underestimate the work ethic, productivity and innovation of America’s people.“ This week we continue our trip in Brazil and will report further our observations.

Another One Bites the Dust!

The great rock poet Freddy Mercury, with the band Queen, had an interesting anthem: “Another One Bites the Dust“. Such is the consolidation of the swine genetic industry, as Designed Genetics, a regional Duroc breeder in Canada, was purchased last week by the Dutch conglomerate Hendrix, based in Box Meer, Netherlands, European Union.

As the swine genetic industry moves to DNA gene mapping, larger population bases and enhanced technology, the rapid advancement in genetics is taking ever greater amounts of capital. Ones that do not have the capital and courage are disappearing.

The purchase of this Duroc population in itself, by a European genetic group, is an affirmation of the global push to the Duroc terminal. The move to meat quality and the forgiving production characteristics combined with Duroc´s evolution to high lean meat percentage, is pulling production from Pietrain-based genetics. Genesus has the world’s largest high-health herd of registered purebreds.