August 10, 2009
Low margins may reduce Brazil calf supply
Brazilian calf supplies are expected to remain low due to lower profitability compared to the rest of the cattle and beef supply chain, as producers (which are increasingly adopting cost management tools for profitability analysis) exit the business or adopt a full cycle mode to enhance the business' bottom line, despite the recent rise in calf prices.
According to local consultant Agripoint, the activity has the lowest margins in the industry, although average calf prices have surged by 28 percent over grown steers in 2008-09. This is the highest since 2001-02, due to low supply and increased demand, triggered by high female slaughter and lotfeeding expansion in recent years.
The Brazilian calf breeding industry is set to change, lifting productivity and quality through technology improvements to increase margins, as costs rise and land destined to breeding and cattle diminishes, overtaken by crops. Breeders are now focused on higher fertility, birth rates and weaning weights - a change which is already in place, as techniques such as artificial insemination are increasingly popular.
