Shortage of cattle supply made prices surge last week

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The upward movement has intensified in recent days, in an unprecedented scenario for the national cattle industry. In São Paulo market the prices of fattened cattle increased more than 32% since the beginning of the month. Meat-packers have been very aggressive in the market, given the need to buy animals of higher standards to fill export quotas for China and Europe. There is a supply gap formed precisely in the period of greatest demand of the year, leading to this unprecedented movement for Brazilian beef. In addition, the increase in slaughtering in mid-2017 resulted in a supply bottleneck at the base of the production chain, causing the pace of births not to keep up with the demand for replacement of animals, also favoring the understanding of the supply situation.

In the interior of São Paulo there are already reports of negotiations that reached the level of BRL 235 per arroba. The trend is that this movement will become increasingly more consistent, with no sign of increase in supply until 2020. The upward movement tends to affect other animal proteins, precisely due to the slow economic recovery, causing the average consumer not to be able to cope with frequent beef highs in the domestic market. Hindquarter reached BRL 17.30 per kilogram. In turn, forequarter broke the mark of BRL 11.15 per kilogram. Under such conditions it is natural for consumers to look for alternatives that maintain their consumption pattern, in which case the trend is that chicken is favored by having a more affordable cost compared to other competitors.

The attached graph expresses the average price of fattened cattle during November in the main consumer hub of the country, São Paulo, particularly in Araçatuba. The average reached the level of BRL 225 per arroba last Friday, unprecedented value for the Brazilian market. Proportionally, fattened cattle in the 1980’s and early 1990’s reached a higher level, given the monetary correction, besides the picture of hyperinflation that was the most striking element of the Brazilian economy in the period. The fact is that the upward movement in the beef industry shows no signs of slowdown, with room for continuity in the short term.