December 20, 2006


The worst is over, Brazil's chicken companies say



Although Brazil's fresh chicken exports would likely drop nearly 8 percent on-year to 2.6 million tonnes, ending years of consecutive record breaking exports, the country's major chicken exporters are optimistic.


The worst is over, according to Sadia (SDA) and Perdigao (PDA) two of Brazil's largest chicken exporters. There has not been any major cases of the deadly bird flu in any of Brazil's major export markets since July 7.


So even if 2006 ends on a sour note, it's not as bad as originally anticipated, said Ricardo Goncalves, president of the Brazilian Chicken Exporters Association, or ABEF. Volume declines were seen at 10 percent a few months ago, but consumption has returned in Europe and the Middle East.


Consumers are learning to live with bird flu and confidence is returning, Goncalves said.


Brazil represents 15 percent of the world's chicken meat production and 41 percent of the world's chicken export market, compared to 35 percent for the second largest player, the US.


Next year, companies expect to recuperate from losses this year and expect exports to reach pre bird flu levels.


Exporters see volume of fresh, frozen chicken meat hitting 2.8 million tonnes, worth US$3.3 billion. Revenue from 2006 exports was US$3 billion. The last time Brazil exported 2.8 million tonnes was in 2005, pre-bird flu.


The sector expects international chicken prices rise for much of 2007 as corn meal prices are expected to continue rising.


Perdigao said it would have to pass increased costs to consumers, but margins would be tighter in the US than Brazil, said Nildemar Secches, president of Perdigao.


Both Sadia and Perdigao intend to spend much of 2007 either completing international investment projects or looking into new ones.


Sadia will invest 800 million Brazilian reals (US$371 million) in 2007, including the completion of its first-ever overseas unit in Kaliningrad, Russia. Perdigao said it's looking into opportunities in Europe and Asia to hedge against bird flu occurrences.


Perdigao said that it will be dividing its overall volume 50/50 between both domestic and international markets, according to Wang Wei Chang, the company's finance director. 


New EU tariffs imposed on Brazilian chicken exports could impact volume to European nations, Gonzales said. Yet, most of Brazils chicken goes to developing markets. Some 54 percent of Brazil's chicken exports go the Middle East and Asia, compared with 13 percent to the EU.

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