May 14, 2021
JBS and BRF affected by surging feed costs in domestic market
Major Brazilian meatpackers JBS SA and BRF SA said it is difficult to pass on rising feed costs to consumers in the Brazilian market, Reuters reported.
Both companies posted first quarter profits after reporting losses last year.
JBS posted first quarter profits of BRL 2.045 billion (~US$386 million; BRL 1 = US$0.19), and the majority of their revenue comes from their North America operations. BRF posted first quarter profits of BRL 22 million (~US$4.15 million) with the majority of their volumes in Brazil.
Lorival Luz, chief executive for BRF, said in response to surging corn prices, the company was considering earlier slaughter for chickens and temporary stoppages at its pork and poultry facilities.
Victor Saragiotto and Felipe Viera, analysts from Credit Suisse, said the almost never ending pressure on grain prices could badly affect BRF and its competitors for the rest of this year.
JBS shares dropped 2.1% while BRF shares fell 2.8%.
Executives from JBS said they were able to pass on rising grain costs to consumers because demand for food was higher in United States and Canada. However, the surging feed costs have affected margins for JBS' Seara processed food division, BRF's direct competitor, due to Brazil's weak economy and slow COVID-19 vaccinations.
JBS said it is well positioned to deal with shortages of corn in Brazil but did not elaborate on the matter.
Both companies said demand from Asia remained strong, especially in China.