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September 23, 2016

Brazilian Livestock Producers Hoping for Better Second Half of 2016

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

This has not been a good year for poultry and hog producers in southern Brazil. The scarcity of corn and the resulting record high domestic corn prices earlier this year led many independent poultry and hog producers to suspend production due to the high cost of corn. Many larger corporate producers slowed down their production by trimming back work hours, placing fewer animals in their facilities, and temporarily closing processing plants all in an effort to stem losses.

According to a report in So Noticias, the Executive President of the Brazilian Association of Animal Protein (ABPA), is expecting Brazilian poultry production in 2016 to total 13 million tons, which is down 4% from the 13.5 million tons estimated earlier this year. Brazilian pork production is now estimated at 3.64 million tons, which is down from 3.76 million tons estimated in January.

Eighty percent of Brazil's hog production and 70% of its poultry production is concentrated in southern Brazil, which is a corn deficit region. Normally, the additional corn needed for animal feed is brought in from central Brazil, but a weak Brazilian currency in 2015 encouraged overly aggressive corn exports in late 2015 and early 2016, which led to Brazil running out of corn earlier this year. By the time emergency imports of corn from Paraguay and Argentina could reach southern Brazil, domestic corn prices in Brazil reached all-time record highs. In some regions, livestock producers could not purchase corn regardless of the price they offered.

Livestock producers in southern Brazil are hoping that the second half of 2016 will be better than the first half and there are tentative signs that their optimism may be justified. The 2016 safrinha corn was a disaster in central Brazil, and as a result, corn is already being imported into southern Brazil from Paraguay and Argentina with more arrivals scheduled for the coming months.

As a result, domestic corn prices have fallen since the imported corn started to arrive in southern Brazil. That is welcomed news for livestock producers, but they also feel that corn must be imported from the United States in order to pressure prices even further. Unfortunately, many GMO corn hybrids that are produced in the U.S. are not authorized to be imported into Brazil. The Brazilian Minister of Agriculture requested an emergency exemption of the prohibition from the commission responsible for authorizing the imports. Unfortunately, the commission took no action on his request in their September meeting. Their next meeting is scheduled for early October, but it is uncertain of the commission will take up the issue.