Brazilian Hog Markets

15 November 2012, at 9:47am

BRAZIL - Since the last Brazilian Market report some six weeks ago, prices have remained fairly steady, and slightly above production cost, which is a welcome relief for the remaining producers, writes Martin Riordan, Genesus Brazil.

In fact, in the southern state of Rio Grande do Sul, the price actually climbed by two per cent in this week’s survey, showing that the market is firm. It reached the value of R$3.16 per kg live weight, which converts to US$1.53. Price firmness is fairly even across Brazil, though regional differences generally persist, often due to the cost of remoteness. In the state of Mato Grosso, market hog prices are generally lower than in states further south, due to the distance from the main markets and also from the ports. But on the other hand, for the same reasons of distance, feed inputs are also cheaper than in other regions. Often, in the past, producers in Mato Grosso made a bigger margin on a lower price than in other regions. However, in the deep crisis over the last year, they too went heavily into the red.

October and November are the months when pork plants and supermarkets traditionally lay in supplies of pork products for higher sales at the end of the year, and no doubt this is a factor in keeping prices firm. Added to the fact that many independent producers have cut back or ceased production, it all creates positive pressure on prices.

However, a driving force in the market is the recent surprising performance of exports. In October, Brazil exported 61,742 metric tons of pork products. This is an increase of 33.6 per cent on the volume for October 2011, and is the highest monthly figure for 2012.

The two major destinations for exports were Ukraine, which took 27.67 per cent of October’s total, followed by Hong Kong with17.8 per cent. Exports to Argentina, which used to be an important and convenient destination for Brazilian pork, have become the victim of Argentina’s strange economic policies during 2012, and are constantly subject to instant blockages which create havoc for both Brazilian exporters and Argentine importers. Total exports to Argentina year to date have been about 19,000 metric tons, a figure 43 per cent lower than the same period last year.

The Brazilian real is steadily devaluing on the foreign exchange market and is now at R$2.07 per US$1. This is a factor that will give a boost to pork exporting companies, though on the other side of the equation, it increases domestic prices of the major inputs, principally corn and soy meal.

With news from around the globe of reductions in sow herds in the major pork producing countries, there is reason to believe that 2013, now just around the corner, could perhaps bring high pork prices on international markets. This would be a boon to remaining producers who have a lot of losses to try to earn back after years of low prices.