Wholesale and live pig prices drop in January

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The prices of the main wholesale and live animal cuts are decreasing this month, as a result of the retraction in domestic demand. A live arroba in São Paulo is pegged at BRL 113.00, down 6.61% from BRL 121.00 in early January. In the interior of Minas Gerais, a live kilogram dropped 7.69%, being pegged today at BRL 6.00. There is a moderate pace of business along the chain, starting with the replacement between wholesale and retail, where retailers act with caution, avoiding the formation of a large volume of stocks, assessing that consumption tends to continue feeling the effect of the household indebtedness in the short term. This demand behavior is typical of a first quarter, with a large portion of the population having additional expenses, besides paying taxes, such as IPVA. With a slower wholesale flow, meat-packers act discreetly in negotiations involving animals, which may result in new price lows in the coming few weeks.

The big point that brings a certain concern to farmers is that in addition to the drop in live pig prices, the cost of animal feedstuff is with an upward trend, lowering the margins of the activity. Corn, the main component of feedstuff, suffers from a restricted supply in much of the country, with producers opting for retention as a recurring strategy. Moreover, the logistics for corn tends to become complicated in the coming few weeks, with the market prioritizing the flow of soybeans and high in freight costs. Thus, a new detachment in the cereal prices is not ruled out during the first quarter.

It is worth noting that despite the recent fall, prices of live pigs in the Center-South remain at a high historical level, as can be seen in the attached chart. If, on the one hand, domestic demand is cooled, on the other hand, external demand remains strong, driven by Chinese purchases, which ends up preventing more aggressive pressure on the Brazilian market. According to preliminary data from the Foreign Trade Secretary (SECEX), Brazil exported 34.0 thousand tons of fresh pork until the third week of January (12 working days), with a daily average of 2.8 million tons. The daily average decreased compared to December (3.1 thousand tons), highlighting that in the last month Brazilian exports were record, and the Chinese accelerated imports, aiming to meet the demand of the lunar new year.