August 11, 2008

Brazil cattle producers struggle with high input costs

Brazilian cattle producers struggled with an 11-percent increase in input costs against only 3-percent increase in the prices of cattle from January to May of 2008.

Industry observers said that from 2003 to 2008, production costs soared 87 percent, while cattle prices (in local currency) increased 82 percent.

The largest cost rise during the first quarter of 2008 was on fertiliser, which rose 48 percent from January to March 2008 and is the second largest input in total production costs.

Labour also accounted for the 9-percent hike as minimum wages in Brazil was increased over the period.

Around 80 percent of Brazil's beef is consumed domestically and despite higher purchasing power among consumers, wholesales and retailers were not able to transfer higher input costs to the buying market, which further limited profitability, observers noted.

Meat prices are an important indicator in the Brazilian consumer price index, accounting for 3 percent of the total.