International Egg and Poultry Review - By the USDA's Agricultural Marketing Service - This is a weekly report looking at international developments concerning the poultry industry, this week looking at Brazil.

Brazil

Brazil’s chicken producers initially profited from consumer reaction to the discovery of Bovine Spongiform Encepalopath (BSE) in Canada in 2003-2004, Foot and Mouth Disease in Europe and South America in 2001-2002 and the accelerated demand for Brazilian poultry products due to outbreaks of avian influenza (AI) in Southeast Asia since late 2003. Since 2003, Brazil’s exports have increased nearly 20% per year and have added 41 new market destinations. In order to maintain the advantage, Brazil tightened controls at ports and airports, companies have forbidden suppliers to receive visitors from potentially infected areas, and banned imports of eggs or any genetic material from affected countries.

In 2005, Brazil accounted for 56% of the major importing markets compared with a 30% share 5 years ago. Poultry exports for Brazil in 2005 comprised of frozen chicken parts (57%), whole frozen chickens (35%), prepared chicken meat (5%), and other poultry meat (3%). The United States and Canada still bar imports of Brazil’s fresh, chilled, and frozen poultry meat because of disease concerns, Exotic Newcastle Disease in particular.

However, since the beginning of 2006, Brazil’s total broiler meat exports have fallen when compared to last year despite precautions taken to protect their exports. Total broiler meat exports during January-May, 2006 totaled 1.05 million tons, a 6% decline from the same period in 2005. A break down of Brazil’s exports during this time frame showed they exported 1.0 million tons of fresh/frozen chicken meat products, 7% below a year earlier. The decline is due in part to AI concerns, increased price competitiveness of U.S. broiler exports and reduced imports by Russia. Meanwhile, they exported 46,200 tons of processed or cooked products, 62% increase over 2005.

The lower demand for Brazilian chicken exports in combination with a 17.6% appreciation in the value of the real, Brazil’s currency, in the first quarter of 2006 and an increase in chicken production resulting in 235,100 tons of additional chicken meat produced during the first quarter of 2006 caused exports to lose some of their profitability and also lowered retail prices of chickens by up to 40% in the first quarter of 2006. The lower whole chicken retail prices ultimately led to a 13% increase in domestic consumption over a year ago. However, even though 71% of total broiler production is consumed domestically and domestic consumption has been growing 7% annually since 1998 expecting to reach 37.9 kg in 2006, compared to 46.5 kg for the U.S., it was not enough to prevent domestic prices from falling significantly.

Producer poultry prices dropped to their lowest levels since 2001. The lower prices resulted in the broiler industry postponing new investments, not repopulating existing houses, reduced imports of hatching eggs and breeding chicks, domestic breeders decreasing production 25%, temporarily closing houses that receive day old chicks for grow out, poultry producers discarding fertilized eggs in some regions and the lay off of approximately 15,000 workers at meat packing plants with several thousand put on forced vacation until markets return to normal. As a result of the cut backs, the monthly housing of slaughter chicks was reduced 10% in April when compared to last year to 333 million birds and the industry expects to further reduce the chicks placed by an estimated 9% by year end when compared to 2005.

Some analysts are already giving the production curtailments credit for averting further price declines and industry is already starting to experience increased revenue, despite the decreased export volume, due to higher prices on the international market. During the January- May, 2006 period sales amounted to U.S.$1.23 billion, 0.93% more than during the same period last year. Others have forecast poultry prices in Brazil to rebound 20% by year end and some companies have cut their sales forecasts from a 15% increase to an 8% increase for the year with pared optimism due to an anticipated continued growing Brazilian economy. Even though workers have either been fired or laid off this year, some processors are continuing with plans to start building new plants in December for start up in 2007.

The Brazilian Poultry Exporters Association (ABef) is also investing U.S.$10 million in advertising in Saudi Arabia, the United Arab Emirates, Kuwait and Russia to launch brand Brazilian Chicken. The idea is to create a stamp and have the 21 companies associated with Abef to use it as a symbol of quality chicken and to have customers in foreign countries identify quality chicken with Brazil.
Source: USDA/FAS and other news sources

To view the full report, including tables please click here

Source: USDA's Agricultural Marketing Service - 27th June 2006