Ever since it got banned from the EU in 2005 following a foot-and-mouth disease outbreak, Brazilian pork has had a succession of misfortunes. But after an unlucky 2013, things are starting to look much brighter this year. 2013 pork exports looked set to cross 725,000 tonnes but were upended by Ukraine's temporary first quarter ban on Brazilian pork. Before the ban, Ukraine absorbed 137,000 tonnes or 27% of Brazil's 2012 pork exports and shipments were expected to rise by another 50,000 tonnes in 2013. Although the ban was in effect only a few months, it did extensive damage to Brazilian pork's trade position.

    

 

 

Export volumes to Ukraine fell by 51% or 70,000 tonnes, totaling only 67,000 tonnes. Between the 50,000 tonne increase in Ukrainian exports that was anticipated and the 70,000 tonne  ban-induced, year-on-year drop off, Ukraine's actions single-handedly pushed Brazil's exports from the over 700,000 tonnes previously anticipated by the USDA to just 585,000 tonnes, down 11.5% from the previous year's 661,000 tonnes.

 

Exports to other markets grew, but it was not enough to offset the drop off in shipments to Ukraine. As a result, in what started as a promising year, Brazil went from exporting 661,000 tonnes in 2012 to 600,000 in 2013.

 

The domestic market was also of no help. Instead of rising by 3.8% as initially projected by the USDA to 2.671 million tonnes, domestic consumption rose just under 1%, from 2.670 million tonnes to 2.696 million tonnes.

 

That too, was unfortunate. With a 14kg per capita pork consumption, a fast growing developing economy and no religious restrictions, Brazil's per capita pork demand has plenty of room to rise to the 20kg to 25kg levels seen in other western countries.

 

Last year however, a slowing economy and high consumer debt levels kept that from happening. With both domestic demand and exports sagging, an initially projected 1.2% increase in 2013 pork production reversed itself into 1.5% output drop, to 3.28 million tonnes.

 

 

 

But the tide is turning for Brazil's swine sector. After restricting imports from Brazil, Russia announced it would allow the country's pork to be imported again. It also put restrictions on EU and US pork at this time; the former due to African Swine Fever outbreak, the latter due to the US's opposing stance in the Crimean crisis.

 

Russia also opted to allow Canadian pork into the country, but that may turn out to be irrelevant: Canada is the second ranked pork exporter after the US, but does not have the capacity or supply to boost exports greatly at this time. And Brazil's real has sunk 10% against the Canadian dollar over the last year.

 

At the same time, America's PEDv epidemic left the leading pork exporter in no position to fill any unexpected supply gaps. This makes Brazil the only large exporter in a position to fill the supply gap created by Russia's suspension of EU pork imports.

 

Moreover, so long as there export market shortfalls, Brazil now has an economic incentive to meet such demand too. From early June to the end of 2013, Brazil's live hog prices rose over 50%, while feed costs fell by nearly a third, restoring profitability. It also means that Brazilian farmers are in a position to boost hog numbers in the second quarter -and those Brazilian hogs could mature in the third and fourth quarter. That would be exactly the time when America's hog shortage peaks under the weight of this spring's mounting PEDv piglet mortality numbers.

 

On the demand side, Brazil's hosting of the world cup guarantees that on top of any PEDv driven export windfalls, domestic demand should expand by at least 2% this year.

 

If, in addition to accommodating 2.3% demand growth in existing export customers, Brazil filled only 100,000 tonnes of export opportunities created by the Russia's trade liberalization, the resumption of exports to Ukraine and the supply gap created by PEDv, it could boost exports 19.6%, to well over 700,000 tonnes. With exports accounting for 18% of production and the home market growing by at least 2%, Brazil has the capability, feed resources -and for now, the profit margins -to expand output by more than 5% this year.

 

Although most forecasts are not this optimistic, the fact remains that with American exports poised to fall by up to several hundred thousand tonnes and Canada in no position to bridge the supply gap, Brazil is becoming the last available export supplier.