June 20, 2006

 

Oversupply forces Brazil's poultry producers to cut production
 

 

Brazil's strong exports in Brazilian poultry is slowing down as a lack of foreign demand and an appreciating real takes its toll, according to the USDA's Livestock, Dairy and poultry report for June.

 

At the beginning of 2006, the lower foreign demand for Brazilian chicken meat combined with the appreciation of Brazil's currency, the real, to reduce the profitability of exports. The real appreciated 17.6 percent for the first quarter of 2006 compared with a year earlier, making Brazilian poultry products more expensive, the report said.

 

USDA figures indicate a rapid escalation of chicken production in Brazil (a 10-percent annual growth since 1998) resulted in 235,100 tonnes of additional chicken meat for the first quarter of 2006.

 

The outbreaks of bird flu in late 2003 in Southeast Asia resulted in greater foreign demand for Brazilian poultry products which was met by a quick increase in production and expanded exports of competitively priced chicken meat, the report noted.

 

Since 2003, Brazil's broiler exports have increased by nearly 20 percent a year. In 2005, Brazil accounted for 56 percent of the major importing markets.

 

However, Brazilian broiler meat exports during January-May 2006 totaled 1.05 million tonnes, a 6-percent decline over the same period last year, the report said.

 

Brazilian broiler meat exports included 1.0 million tonnes of fresh/frozen chicken meat products (a 7-percent decrease over a year earlier), and 46,200 tonnes of processed (cooked) products (representing a 62-percent increase over the same period in 2005), indicating that the reductions in shipments of fresh\frozen products have been partially offset by increases in cooked products, the report noted.

 

USDA said Brazil's domestic broiler consumption is significant, as 71 percent of total production is consumed in the domestic market. Lower retail prices for whole chickens compared with beef and pork led to higher domestic consumption levels, a 13-percent increase in the first quarter of 2006 compared with the same period last year.

 

However, the capacity of the domestic poultry market to absorb increased supplies has not been sufficient to prevent domestic prices from falling significantly, the report said.

 

According to the report, producer poultry prices have declined to their lowest levels since 2001, significantly reducing industry profitability.

 

Lower broiler prices have induced the Brazilian broiler industry to implement several short-term production reduction strategies, including holding up new sector investment, reducing the housing of chicks, and temporarily closing chicken houses that receive day-old chicks for grow out.

 

Consequently, the monthly housing of slaughter chicks was reduced to 333 million birds in April 2006, representing a 10-percent reduction compared with last year, USDA said.

 

The industry expects to further reduce the chicks placed by an estimated 9 percent by year-end compared with the levels in 2005. The Brazilian Government announced the allocation of a US$150 million credit line for the storage of chicken (and pork meat) to assist the industries to weather the current market conditions.

 

Brazil is beginning to focus on higher value broiler products such as broiler parts. Major Brazilian markets for fresh/chilled/frozen poultry meat last year included Japan, Middle Eastern countries, the EU-25, and Russia.

 

Unlike the red meats, Brazil's poultry meat exports are accepted by some premium markets, such as Japan and Korea, the report said.

 

The US and Canada, however, still bar imports of Brazil's fresh, chilled, and frozen poultry meat because of disease concerns. Major markets for Brazilian processed poultry meat so far in 2006 are the EU-25 and the Middle Eastern countries.