May 28, 2008

Higher production costs drive Brazilian chicken prices on par with the US 
   
  

Production costs for chicken in Brazil are on the rise, putting the country on par with US production prices and demoting it from the position of lowest-cost producer in the world, according to market analysts.

"It costs US$0.4 per pound for live chicken, and Brazil and the US are about the same," said Paul Aho, an independent US poultry consultant.

Record production in January and February lowered prices in Brazil significantly, but sustained increases in grain prices offset falling prices for poultry.

Feed accounts for roughly half of the production cost in Brazil and the US, with feed accounting for slightly more - 60 percent at the most - in Brazil.

The cost of feed rose 11.3 percent between December 2007 and March 2008, and another 11.1 percent between April and May of this year, according to Cesar Castro from MB Associados consultancy in Sao Paulo.

Increased production costs can also be tied to the strengthening of the Brazilian real against the dollar.

According to Aho, Brazil's reputation as a low-cost producer would depend on the exchange rate and the country's future policy on GM corn, which costs less to grow and provides higher yields.