Brazil's BRF may return to European market sooner due to swine fever

African Swine Fever has caused massive reductions in meat supplies across Europe, to the benefit of poultry.
calendar icon 13 May 2019
clock icon 3 minute read

Reuters reported that BRF SA, the world's largest chicken exporter, believes Europe could lift an embargo affecting a dozen of its plants sooner than anticipated because of the global meat supply imbalance deriving from a deadly hog disease in China.

In remarks to journalists regarding a third straight quarterly loss, BRF Chairman Pedro Parente said demand for meat products will grow globally, which could lead Europe to relax restrictions on Brazilian plants.

"I would not be surprised if European authorities sped up approval of Brazilian plants," Parente said. In a call with analysts, the company had said it is ready to cater to more demand from Europe should it reopen its markets sooner.

Rising feed costs led to the latest quarterly loss, but BRF executives said the cost of feed is likely to fall as a result of ample corn supplies in Brazil, which will be reflected in results during the second half of 2019.

BRF posted a first-quarter net loss of 113 million reais ($28.6 million) from ongoing operations. A one-time 863 million reais non-cash charge stemming from asset sales in Argentina expanded the loss for the quarter to 1 billion reais.

BRF shares fell almost 3 percent to 29.84 reais in early afternoon trading.

The food processor also reported a 7.3 percent drop in the total volume of products sold, an 80,000-tonne drop in the quarter, which was compensated by a 13 percent rise in the price of its products.

The price increases helped lift net revenue for the quarter by almost 5 percent to 7.4 billion reais. But the sharp rise in feed prices thwarted the company's turnaround efforts.

In Saudi Arabia, a key market where BRF plans to expand its presence through a local production partnership, volumes dropped as a result of the decision to lift prices. The drop was only partly offset by sales to Egypt and Yemen, the firm said.

BRF also hopes to certify four more plants to export meat products to China, as the African swine fever sweeping across the Asian country boosts potential demand for Brazilian meat.

Still, BRF executives said it may take up to three years for any company to increase output and stabilise production given the length of the hog production cycle.

($1 = 3.9539 reais)

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