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USDA GAIN: Poultry and Products


29 August 2012

USDA GAIN: Brazil Poultry and Products Annual 2012USDA GAIN: Brazil Poultry and Products Annual 2012

Post forecasts broiler production to rebound by 2 percent in 2013 to 13 million metric tons after a small decline in production in 2012. The Post forecast reflects a conservative estimate by our trade sources that the Brazilian economy will recover in 2013 and will improve domestic demand for animal protein. The export market is estimated to increase slowly next year based on higher exports to Asia and the Middle East. Post revised production and exports in 2012 to reflect the impact of rising feed costs in the poultry sector.

USDA GAIN: Poultry and Products

Executive Summary:

Post forecasts broiler production to rebound by 2 percent in 2013 after a small decline estimated for 2012. The Post forecast reflects a general opinion among trade sources that Brazil’s economic growth is expected to recover in 2012 which will strengthen household income. Estimated record Brazilian soybean and corn crops should help to mitigate the impact of rising feed costs. However, Post sources also identify other concerns that can adversely affect the poultry sector in the coming year: a) Squeezed profit margins for producers and processors due to rising feed costs may continue through the first quarter of next year, and, b) The high level of consumer debt in Brazil may also undercut domestic demand of animal proteins in general. Broiler exports are also forecast to increase slowly because of the continued uncertainties in the world economy due to the debt crisis in Europe and in the United States. The outlook for turkey production and exports is for less growth than previous years.

Poultry, Meat, Broiler

Production:

Broiler production is forecast to grow by 2 percent in 2013, as compared to Post’s revised downward production level in 2012. FAS Brasilia believes that a production estimate at 13 million metric tons reflects the current expectations of trade sources with improved economic conditions next year and estimated record soybean and corn crops. In addition, the federal government will make use of several domestic support programs and will extend credit payment deadlines to assist broiler producers to reduce the impact of rising feed costs.

However, there are some concerns that can impact next year’s forecasts: a) The current high grain and oilseed prices have squeezed producers’ profit margins this year and eventually will result in some small independent producers going out of business. This situation may continue throughout the first quarter of next year; b) A slowdown in the path of the growth of domestic consumption due to the high level of indebtedness of Brazilian consumers may reduce consumption of animal protein, and c) Current disappointing export performance due to the international economic uncertainties derived mostly from the European Union’s financial crisis and some trade issues, mostly with Russia and South Africa, could undercut the forecast.

Post revised 2012 broiler production to 12.7 million metric tons, a small drop of one percent from 2011 reflecting the current problems faced by Brazilian producers with very high feed costs and their decision to cut production by 5 to 10 percent by the end of the year.

Production Costs

The increase in the cost of broiler production for the period July 2011 and July 2012 was almost 33 percent, while the producer price during the same period increased by less than 5 percent. However, during the first two weeks of August 2012, reflecting the impact of rising feed costs, broiler prices have significantly increased by over 30 percent and most of the industry is passing on these price adjustments to consumers.

Prices

Sao Paulo: Broiler production costs and wholesale prices for broilers (RTC), corn, and soybean meal (Sao Paulo state), 2006-2011:

Consumption:

Domestic consumption of broiler meat in 2013 is project to increase by 1.6 percent to 9.4 million metric tons. Our estimate reflects a continuing increase in disposable income of Brazilian consumers, but includes new factors that will likely reduce the path of growth of domestic consumption of broilers: a) High indebtedness of Brazilian consumers, as shown by recent data that debt payments eat up over 46 of the household income in Brazil, and b) Competition from lowered beef prices.

Trade:

Post forecasts broiler exports in 2013 to rebound by 3 percent. The growth in exports is likely to be driven by higher sales of whole broilers, in general and chicken parts to China and Hong Kong in particular. Trade sources also expect higher exports to Egypt and Iraq. Brazilian exporters currently have three major concerns affecting the outlook for broiler exports in 2013: a) despite the recent devaluation of the Brazilian currency, higher production costs of broilers during the second half of 2012 and first half of 2013 are expected to impact on the cost of exports; b) uncertainties derived from the world financial crisis, mostly in Europe, and its impact on importing markets will slow growth; and c) specific trade issues with major trading partners such as the Russian Federation (slow relisting of Brazilian poultry plants), Venezuela (payment defaults) and South Africa (application of antidumping tariffs on Brazilian broiler of 62.92% on whole broilers and 46.59% on chicken parts) will negatively affect performance. South Africa was the 7th largest market for Brazilian broiler exports in 2011 with 195,416 metric tons (PWE).

Post updated trade data for Jan-Jun 2012 to include final official export numbers. Broiler export markets with major increases in 2012 were South Korea (+265%), followed by Egypt (+157%) and China (+42%). Brazilian meat inspection officials expect to more Brazilian plants added to the list of eligible exporters to China before the end of the year. Markets with major declines were Kuwait (-40%) followed by Bahrain (-31%), Venezuela (-26%), the European Union (-17%), Japan (-16%) and the Russian Federation (-14%). The decline in exports to Russia derived from the unresolved issue of delisted Brazilian poultry plants by Russian officials. The drop in exports to Venezuela is alleged to an increase in local broiler production in that country, but trade sources also indicated policy restrictions against Brazilian broiler imports were in place.

Production, Supply and Demand Data Statistics:

Poultry, Meat, Turkey

Production:

Turkey production is project to increase by 2 percent in 2012. Rising feed costs combined with a slowdown in the path of growth of domestic demand are the main factors affecting production growth.

Exports

Turkey exports are project to continue to grow in 2013, but at a reduced path of growth as the European Union is likely to reduce imports from Brazil.

Production, Supply and Demand Data Statistics:

August 2012

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