February 7, 2014    

Since the end of last year, lack of rains and very high temperatures in most part of Brazil have affected the development of pastures, bringing difficulties for the fattening of animals that would be slaughtered in this early 2014.

The country's cattle supply continues relatively low and prices, firm, in the opposite way of players' expectations about the typical trend observed in the same period in years before.

ON January 31, the ESALQ/BM&FBovespa Index (Sao Paulo State) for fed cattle closed at BRL115.06 (US$47.59), for a slight increase of 0.3% compared to December 30. Claiming difficulties to sell beef in the wholesale market, slaughterhouses tried to trade at lower prices or not operate during January.

South-eastern and Central-Western states have water deficit. In these regions, water reserves in the soil oscillate from 20% to 40%, below the range considered adequate for the vegetation growth, between 60% and 70%.

The lack of rains is especially critical in Sao Paulo, Goias and South Minas Gerais, where most pastures are still at bad conditions. In some regions of the Central-West Brazil, such as Dourados (Mato Grosso do Sul) and Colider (Mato Grosso), on the other hand, rains resumed falling in late January. In Cuiaba and Rondonia, pastures conditions are better, but, in these areas, the excess of rains might be affecting the animal transportation.

Besides the low volume of rains, temperatures are also very high. The average temperature in Mato Grosso in January was 26.6 degrees (Celsius), 4% higher compared to the average in January 2013 (25.7 degrees) and 10% more than the historical average. In Sao Paulo, the average in January was 25.3 degrees, an increase of three degrees compared to last year, according to data from Inmet (National Institute of Meteorology in Brazil).

As for the swine sector, pork quotes continued to move down in almost all regions surveyed by Centre for Advanced Studies on Applied Economics (CEPEA) in late January. Besides the weak domestic demand (typical in this period of the year), exports still do not indicate a reaction. For three consecutive months, shipments of the in natura product have been decreasing.

Considering the poultry market, broiler prices traded in the wholesale market finish the first month of 2014 with sharp decreases. The most significant price drop in the accumulated until January 29, of 14%, was registered for chilled broiler in Sao Jose do Rio Preto (Sao Paulo State), and the product was traded at BRL3.17 (US$1.30) per kilogramme on January 29, against the BRL3.67 (US$1.50) per kilogramme on December 30, 2013. According to players surveyed by CEPEA, the combination of reduced demand, in a period of school vacation and extra expenses, and higher supply explains the downward trend.