Brazil: Hog Markets

4 October 2012, at 8:09am

BRAZIL - After the dramatic increase in prices during August, the market has dropped back some 10 per cent and stabilised, leaving producers a bit below break-even price on average but with much smaller losses than in the recent past, writes Martin Riordan.

This market behavior has been fairly uniform across the country. The price for market hogs in the southern state of Rio Grande do Sul rose about three per cent this week to around US$ 1.42 per kg live weight.

Prices for the two major feed inputs have also remained fairly stable and very high in historic terms. In Rio Grande do Sul, for which we have reliable data, soy meal currently costs around US$ 645.00 per metric ton and corn is fetching about US$ 6.85 per bushel.

On a positive note, exports of pork products showed strong gains in September. According to numbers disclosed by the Ministry of Development, Industry and Commerce, in September Brazil exported 54,500 metric tons of pork products, a volume 16 per cent higher than exports in August and an impressive 55.3 per cent higher than September of last year. The total value of exports was US$ 146.1 million, which represents an increase of 21.4 per cent and 43.9 per cent respectively, which indicates that the average price of exports fell slightly since last year.

Variations in the dollar exchange rate over the last 12 months have favored exporters. A year ago, the rate was averaging around R$ 1.75 (reals) per dollar. It rose and fell until April this year and then showed a steady upward trend, breaking the R$ 2.00 barrier in June. Since then it has fluctuated with a few cents of R$ 2.00 and is currently R$ 2.02. This has given a boost to the major pork plants which all depend on exports for a proportion of their revenues.

News of sow liquidation in important pork-producing countries, particularly the USA and Canada, indicates a coming shortage of pork for the world during 2013. It is likely that this will bring very high prices and those still in the business will do well. However, in Brazil, just as in the USA and Canada, there will be many casualties who do not manage to survive until the bonanza, who were forced out when their accumulated debts reached a critical level, having eaten away their assets over recent years.

This is a social tragedy. Many of these victims are personal friends, known for their hard and competent work, dedication and persistence. However, speaking from personal experience, I can say that there IS a life after pig farming! It is a jolt to the system, and the residual problems are many, but by applying the same hard work, competence, dedication and persistence to a different (and preferably more profitable) activity, it is possible to overcome the challenges. Don’t lose heart!