FEED Business Worldwide - April, 2012

 

Is Brazil's broiler sector all grown up?  

 

by Eric J. BROOKS

 

 

After years of dodging expected slowdowns in its chicken output, factors beyond its control are finally tapering off the momentum of Brazil's broiler production. 2011 was supposed to be a prosperous year, with the USDA initially expecting both output and exports to rise by 4% to 5%. While domestic consumption outdid expectations by rising 5.6%, Brazilian poultry's trade performance was a completely different story. While short-term considerations certainly played a part, certain long-term trends are also taking their toll.

 

 

 

Essentially, the EU's economic problems and protectionist measures on the parts of importers took their toll. In total, 2011 saw Brazil's broiler exports up a meager 1.2% by volume, from 2010's 3.181 million tonnes to 3.219 million tonnes in 2011. Actual cash receipts from broiler exports however, were up by more than 10%, as producers capitalized on higher world broiler prices. For 2012, exports are projected to rise by 3%, to 3.315 million tonnes.

 

With the EU's financial crisis denting its sales to that continent, Brazil's 2011 and 2012 poultry production estimates have been scaled back. In the latest USDA GAIN Report on Brazil's poultry sector, 2011 production was scaled by a nominal 0.6% from 12.95 million tonnes to 12.86 million.

 

However, 2012 poultry production was impacted by a greater extent. Initial estimates of a 5% rise in broiler meat output were trimmed back to 3%, from 13.6 million tonnes to 13.3 million tonnes.  The lower production is partly due to slower domestic demand growth. Higher feed costs trimmed domestic consumption growth to 3% or 9.94 million tonnes, from the previously expected 5% or 10.16 million tonnes.

 

But the slowdown's more problematic culprit is exports. Instead of rising from 3.2 to 3.4 million tonnes, they will only increase by 3%, to 3.3 million tonnes. And the deteriorating export performance is more problematic to deal with: The recession in Europe, protectionism and the rising value of its currency are holding back its exports. These are all factors largely outside Brazil's control.

 

The overall export picture however, remains mixed, with strong successes and setbacks standing out in equal measure. For 2012, higher growth in whole chickens to Egypt, Iraq and Hong Kong and chicken parts to China is being partly offset by trade barriers curtailing sales to Russia and South Africa. Russia delisted Brazilian broiler plants about one year ago and is deliberately re-certifying them at a slow pace so as to protect domestic poultry producers. Similarly, South Africa recently imposed anti-dumping import duties of 62.92% of whole Brazilian chickens and 46.59% on chicken parts.

 

All this made for a successful, but volatile year for the Brazilian poultry trade. On one hand, 2011 exports to China, Angola and Iraq jumped by 61%, 38% and 28% respectively. On the other hand, shipments to Russia and Egypt fell by 58% and 42% respectively.

 

Egypt's decline however, was due to logistical issues created by political unrest. Assuming political stability returns, Egypt's imports of Brazilian poultry should rebound and resume their previous, rapid growth rate.

 

All this implies that going forward; life will remain prosperous, yet become more difficult for Brazilian poultry producers. The early to mid 2000s when output, domestic consumption and exports all frequently grew at near double-digit rates are gone and will not return.