Coronavirus and its possible impacts on Brazilian meat industry

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The coronavirus produces great uncertainties about the Chinese economy in the course of 2020. Any statement regarding macroeconomic performance is premature at this moment, we can only wait for the disease to be effectively controlled. The impact on the meat industry is also unpredictable, but a short exercise may favor the evolution of some scenarios, which are not only negative, there is the possibility of benefit to exporters according to the evolution of the Chinese government’s strategies.

Blockages within China have some unpleasant effects for the local meat industry. Feedstuff and other supplies do not reach some destinations, resulting in the death of chicken and pigs. In addition to producing inflation in the domestic market, this situation has undermined the plan to rebuild the pig herd that the Chinese government was putting into practice. Recalling that the country is still experiencing all the disorders caused by the African Swine Fever epidemic, which resulted in the loss of 40% of the pig herd in the Asian country. Another result of the epidemic is the accumulation of ships containing meat in Chinese ports. These cargoes are unable to reach their destination. Finally, companies around the world signal the lack of containers, since they are unable to return to the port area due to the blockages.

For the Brazilian market, particularly, it is important to highlight that beef import contracts from South America were in the process of renegotiation after the price escalation in the last quarter. This whole process was paralyzed due to the coronavirus epidemic. The expectation is that negotiations will resume soon. It is important to note that in the event of progress of the epidemic, the possibility of recession in China increases, which will certainly produce a retraction in demand, not only for meat but also for several products.