March 1, 2010

Brazil cattle margins continue decline

Despite lower oil prices that helped reduce production costs in 2009, Brazilian cattle margins continue to decrease as steer prices dropped by a larger percentage.

Between January and December 2009, the average operational cost for beef in Brazil decreased by 3%. The main decreases were in mineral supplements and fertilisers, both closely related to oil prices.

But average heavy steer price decreased by 7% during the same period, mainly due to lower export demand and a weak US dollar, which made processors reluctant to pay higher prices.

Lower margins also affected producers in 2008, during the period January to December 2008, the total weighted operational costs soared 26%, while the price for a heavy steer indicator only increased 12%.

The input registering the highest price rise during 2009 was pasture seed, which rose as producers focused on pasture maintenance and renewal. Forecasts indicate an improved cattle price in the near future, as demand recovers and supply remains tight.