September 8, 2020
Beef more profitable than poultry during the COVID-19 pandemic
Global meat suppliers focusing on beef are outperforming those with an emphasis on poultry, even though chicken is cheaper compared to other proteins, Bloomberg reported.
Chicken producers in the United States and Brazil have been affected by meat oversupply, lower prices and poor consumer consumption. Analysts said producers may need to cut down on production to increase prices and margins.
On the other hand, beef producers have benefitted from the COVID-19 pandemic with higher demand and better prices.
There is not enough meat to meet demand in the United States, but meat production has returned to normal following temporary COVID-19 outbreak-related closures. Peter Galbo, a Bank of America analyst, said there is going to be a surge of beef into the market.
Chicken prices however have fallen and with poor demand, retail outlets will not advertise to boost its sales.
Sanderson Farms projected a 5% drop in its production for the fourth quarter of fiscal 2020, with Joe Sanderson, CEO of the company, adding that there is reduced demand for chicken during the holiday season.
Ricardo Santin, head of exporter group ABPA, said Brazilian chicken plants will lower production or increase prices to cover rising feed costs. Corn and soymeal prices are currently hitting record highs.
Ana Luiza Lodi, an analyst at StoneX in Campinas, said corn prices will remain high following tight supplies in 2020. The Brazilian government is proposing to exempting imports from tariffs to drop costs
Brazilian poultry destinations such as Saudi Arabia and the United Arab Emirates have lowered their imports significantly in 2020. August export prices dropped 20% compared to the year prior.
China has increased its imports of Brazilian meat, with 28% higher imports in 2020. However, China only accounts for 17% of Brazilian chicken exports. For beef, China has reported record breaking shipments in 2020, as China accounts for 60% of all Brazilian exports.
Cesar de Castro Alves, an agriculture consultant at Itau BBA, said not even the lower Brazilian real, increasing export revenues in local currency could offset higher production costs and margins. Chicken production margins in Brazil in May was negative 5%.
The Brazilian domestic market has been hampered has restaurant sales remain low and schools are still closed. Alves said Brazilian chicken producers are pushing for higher production even through there is lower export demand and higher costs. He said producers should reduce supply to increase prices and become profitable.