Restrictive mobility and social isolation measures used to combat the COVID-19 pandemic are profoundly impacting markets in Brazil and the United States.
Brazil – Slaughterhouses find it difficult to transport production satisfactorily, with important economic activities such as restaurants, malls, schools, and other establishments still closed in much of the country. Given this situation, there is little impetus in the acquisition of slaughter animals, which are kept on the farm, putting pressure on livestock prices. It is worth mentioning that Brazilian exports continue to perform well, but about 80% of production is in the domestic market, and in the face of a sharp decline in local demand, there is no way to avoid supply surpluses. An adjustment in production is necessary for prices to find a support point. Another important point is that exports will not increase drastically beyond the levels currently observed, since the number of plants accredited to export to China is still limited (concentrated in the South of the country, and especially in Santa Catarina), besides the fact that in several locations of the country there is still the use of ractopamine, a substance not allowed in China, in the creation of swine. The accreditation of new plants is subject to a change in this practice.
Owing to the surplus of animals in chicken farms and low prices, the trend is that housing will be cut in the coming few months, especially in states that do not export to China. In the southern states, the adjustment of production may occur through cuts in the average weight of animals and with a focus on shipments, which may balance regional availability.
The Brazilian market is beginning to pay attention to news involving a possible relaxation of restrictive measures in the country, which may open a process of normalization of meat sales and halt the lows in both wholesale and livestock, but reports show some divergences, mainly regarding dates.
United States – the situation is more complicated in the United States than in Brazil. The contamination of large numbers of employees by COVID-19 has led to the closure of U.S. meat slaughtering and processing plants in recent weeks. Companies such as Tyson Foods, JBS USA, besides Smithfield Foods, closed some of their plants. Faced with the possibility of a shortage in retail and aiming to bring some stimulus to producers, who are faced with a large surplus of animals on the farms, which results in a sharp decline in live and carcass prices, President Donald Trump has adopted protective measures for slaughterhouses and meat processing industries in the country so that they remain in operation, despite the impact of COVID-19. Such protective measures can prevent lawsuits if employees become ill from coronavirus, bringing confidence that industries will reopen. Moreover, the guidelines on health will increase, aiming to minimize the risks of COVID-19 inside of companies. A study by the country’s authorities pointed out that without this government’s intervention, the number of plants closed in a few weeks could grow rapidly, impacting the meat supply capacity in the United States by up to 80%.