December 23, 2008

Financial woes begin havoc on Brazil poultry


Many leading poultry producers in Brazil are feeling the pinch of the world financial crisis as with the continual downfall of prices and exports of Brazilian poultry.


The Poultry Union in Brazil has asked companies to lower chick lodgings by 15 percent to avoid a huge surplus of meat in early 2009 as demand could fall by 10 percent.


The Brazilian real has also fallen by more than 30 percent against the US dollar, implicating export prices.


With a third of Brazil's poultry meat exports aimed at the Middle East, Brazil's poultry exports have taken a setback. Sales to other oil exporting countries in Africa, notably Angola and Venezuela, which stopped buying chicken from the US or Colombia, to become Brazil's fourth most important customer this year, are also expected to fall.


Japan is also suspending imports until new prices have been agreed. Another big market, China may import less due to its slower economic growth while Russia-- Brazil's sixth largest customer-- has momentarily halted imports.


A total of 30 percent of the poultry produced in Brazil is exported.


Many of Brazil's poultry processors are affected by these downturns in demand. Brazil's largest processor and exporter, Sadia, for example, lost at least US$500 million in operations and has had to borrow heavily. 


In the past year, Brazil's poultry prices climbed to more than US$2,000 a tonne which is an increase of more than 30 percent. Now, importers are demanding that prices should be slashed by at least the same amount as the real has fallen.


The domestic market is also seen to be hit as export markets cut back on demand, leading to a surplus in the domestic market.


For this reason, the four conglomerates--Sadia, Perdigao, Cargill-owned Seara, and the French-owned Doux-- accounting 75 percent of exports will have to increase their shipments by 5 percent.


If 10 percent or possibly even 20 percent less is exported in the first quarter of 2009, as some analysts fear, a huge surplus of whole birds and less sophisticated cuts which the "bigfour" usually do not sell in Brazil, would pile up. This would have to be sold off cheaply on the domestic market.

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