Wholesale and livestock prices of swine find support in Brazilian market

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Wholesale and live hog prices found a support point in Brazil in May, with a slight improvement in the business flow along the chain and accelerated exports. However, there is no room for consistent highs and a price recovery to levels recorded before the COVID-19 pandemic, due to the strong decline in domestic demand. Some states in the country started a process of reopening the economy, with malls and restaurants returning to activities but with restrictions, which suggests that the resumption of consumption in the country will occur slowly. It is also worth noting that the consumption profile has undergone a drastic change, with families tightening their budgets in the face of deteriorating income and growing risk of unemployment.

The crisis in the sector is not only deeper due to the high flow of exports, which helps absorb part of the surplus supply from the domestic market. According to preliminary data from the Foreign Trade Secretary (SECEX), until the third week of May (with 15 business days), Brazil exported 69.181 thousand tons of fresh, chilled or frozen pork, with a daily average of 4.612 thousand tons. As a comparison in May 2019 the daily average was 2,690 thousand tons. Possibly, Brazilian exports will reach a historical record in May.

However, only exports may be insufficient for a consistent resumption of domestic prices in 2020, considering that about 80% of the national production are directed to local consumption, which will continue to suffer from the loss of purchasing power of the population. Brazilian production must adjust to the new reality so that prices reach healthy levels. Another point that deserves attention is the news related to the intensification of the work of the Labor Public Ministry in large slaughterhouses in the country due to the spread of COVID-19 amid employees. Some slaughterhouses in the south of the country were paralyzed in May, affecting mainly chicken. So far these have been isolated facts, but if this process intensifies, there may be a serious distortion along the production chain, as was seen in the United States, with farms overcrowded with animals and retailers facing supply shortages.