Brazilian pork producers hit by spike in corn prices

The high cost of corn is impacting Brazilian pig and poultry production as the primary feed ingredient sees a market spike.
calendar icon 19 June 2019
clock icon 4 minute read

BRF blamed surging corn prices that year for an annual loss of 372 million reais ($95 million), but the company said it is watching carefully this time to avoid getting squeezed.

"We already have corn purchasing deals for the next 12 months," said BRF, the world's largest chicken exporter.

JBS, which controls Seara, another large pork and poultry player in Brazil, declined to comment.

The higher corn cost would limit profit margins for the companies at a moment when pork exports, for example, are 40 percent up due to strong demand from China.

Antônio Barreto, an food industry analyst at broker Itaú BBA, said that based on recent exchanges he had with companies recently it appears they do not have a big enough corn position.

"Some people were caught off guard by the rise in corn prices," said Thiago Bernardino de Carvalho, a meat industry analyst at the University of Sao Paulo's Esalq/Cepea think-tank.

Carvalho said meatpackers in general have adequate knowledge of market protection mechanisms, but since most projections were indicating a large second corn crop in Brazil this year some of them might not have all the supply contracts they need.

Despite the large domestic corn crop, the price rise in Chicago made Brazilian corn very competitive in the global market, fuelling exports that will reduce local supplies.

Corn exports are expected to be record in 2019, possibly above 32 million tonnes, according to cereal exporters association Anec.

($1 = 3.8964 reais)

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