2013 Promises Well

Normally in Brazil pig prices go into the doldrums around the New Year, at least until Carnival (nothing really happens in Brazil before Carnival!). Then we are used to hearing that people don’t eat meat during Lent, and prices stay low until Easter. As I understand it, these are mostly arguments used by plants to keep prices low.

However, this year, prices have shown no drop from the reasonable levels they reached at the end of 2010, of around US$1.65 per kg live weight (74.86?/lb.) . At this price, the producer is earning a small margin, depending on his circumstances, of 5-10 per cent. Well, Carnival is now over, we are into Lent, and prices are still holding up. So the market is firm and pigs are in relatively short supply. There is no reason to believe that supply will increase in the near future and, with the market improving slightly, prices may even begin to climb.

The export scene is looking positive. Figures for January show increases of 7.42 per cent in value and 5.08 per cent in volume. Good sales to Russia, Ukraine and Uruguay helped to achieve these numbers. Exports to Russia increased an amazing 454 per cent on January of last year – it seems that the Russians are switching suppliers again in their eternal struggle to sow panic in markets.

Comparing exports in 2012 with 2011, volume increased by 12.6 per cent to 581,477 metric tons while value increased by 4.21 per cent, to US$1.495 billion. There is reason to be optimistic that 2013 will exceed 2012 in both volume and value.

China has approved a further two plants for export of pork products. Although exports to China are still very small, the tendency is for them to increase as more plants are approved. And, as we are often told, Chinese consumption is so huge that, once we break into that market, the sky’s the limit!

The Brazilian grain harvest is expected to break records this year. However, with world grain prices high, much will be exported, and these high prices will be reflected in domestic prices, so there is no expectation of feed prices falling in the short term. Although soy meal prices have fallen back somewhat, to around US$500.00 per metric ton, they are still much higher than "normal". Corn holds firm around US$6.30 per bushel with no prospects of a reduction.

Brazil is a country with resources which few countries can match, and it has dynamic businessmen who try to take advantage of this. However, the much commented “Brazil cost“ takes a heavy toll of the efforts of those who want to produce. Any new activity which affects the environment (and what activity doesn’t?) has to go through three stages of licensing. Each stage involves much bureaucracy, dealing with public officials who seem to work for Brazil’s international competitors.

On top of this, the draconian environmental laws mean that few producers of any kind would escape punishment if thoroughly inspected by the men from the government. This punishment can involve prosecution at three levels: civil, criminal and administrative, leading to fines and/or imprisonment.

The Labor laws are another challenge, and pig producers are particularly susceptible to them as their inputs include biological products and their product is 100 per cent biological. In 2011, the Labor Courts transferred around US$5 billion from employers to employees. It is a kind of Russian roulette in which, if the employer is taken to court, he will lose. It is just a question of whether it will be US$1,000 or US$100,000, and that depends on the mood of the judge that day.