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August 27, 2018

Brazil's Poultry and Pork Exports to Disappoint in 2018

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazil's exports of poultry and pork were already facing headwinds when the 11-day Brazilian truck driver strike occurred back in May. The strike had an additional severe impact on the livestock sector which was confirmed by a report released last week by the Brazilian Association of Animal Protein (ABPA) confirming that Brazil's exports of poultry and pork will decline in 2018.

ABPA estimates that Brazil's poultry exports will decline 2-3% in 2018 to approximately 4.2 million tons. At the start of 2018, it was anticipated that poultry exports would increase 1-3% in 2018. For pork, ABPA now estimates that pork exports will decline 10-12% in 2018 to the range of 620,000 tons. At the start of the year, it was anticipated that pork exports would increase 5%.

The problem with poultry exports started when the European Union suspended imports from various production facilities operated by BRF due to sanitary issues. BRF and the Brazilian government have been working with European authorities to resolve their outstanding issues.

To further complicate poultry exports, virtually the entire poultry sector ground to a halt during the truck driver strike. Within a few days of the start of the strike, nearly all the poultry processing facilities closed down due to lack of chickens to process, exports were forced to cancel contracts due to lack of product, even some poultry producers reported that some of their chickens died due to lack of feed deliveries. After the strike ended, it took approximately 40 days for the poultry sector to return to its normal production rhythm.

The president of ABPA recently indicated that poultry production is now back on track, but the damage to exports has already been done.

The poultry sector still faces problems from higher freight rates that increased approximately 35% after the strike ended. The price of corn has also increased significantly due to reduced safrinha corn production and also higher freight rates to transport the corn from central Brazil to southern Brazil. Part of the lost exports to the European Union were made up for increased exports to China, Hong Kong, and the rest of South America.

The problem for pork exports started late last year when Russia placed an embargo on Brazilian pork due to what Russian authorities claimed was the presence of an illegal growth hormones in Brazilian pork. Brazilian authorities have vigorously disputed those claims and they have been working with Russian officials to resolve their difference.

Part of the lost Russian business was compensated for by increased pork exports to China, Hong Kong, and the rest of South America.

Going forward, Brazilian meat exporters are now more confident that they can reclaim some of the lost business due to the weakening of the Brazilian real compared to the U.S. dollar. They feel that poultry and pork exports could be increased due to Brazilian products becoming more competitive in the world market due to the weaker currency.