Brazil’s domestic availability in decline with strong pork export pace

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Prices along the chain are firm in Brazil and with no signs of trend reversal due to the lean availability. Besides lower domestic availability, pork prices have increased in recent weeks partly because of an inflationary movement, cost, and financial liquidity. Other commodities, such as rice, cotton, chicken have an inflationary movement at this moment. Farmers have been looking for constant corrections for livestock, trying to sustain their margins. Corn has recently begun a downward movement, with a rising commitment by producers, which tends to bring some relief to the cost structure of farmers. On the other hand, for meal the scenario will remain complicated, considering there is a shortage of supply in the country, generated by the strong pace of soybean exports.

According to SAFRAS & Mercado, pork availability in the Brazilian market should fall 2.7% in 2020 compared to last year, reaching 3.683 million tons. This scenario is mainly the result of the strong flow of exports, considering that production is growing. Brazilian exports in 2020 were estimated at 996.3 thousand tons, an increase of 38.6% over 718.8 thousand tons of 2019. China will continue to act strongly in imports in the coming few months and in 2021, since the country suffers from a large production deficit, and pork prices are close to their historic top. This supply gap will take a prolonged period to be corrected given the chain cycle, from the birth of matrices to slaughter. The full recovery of the Chinese herd will not take place until 2023, but the curve of imports must show signs of weakening before that, as its production progresses, which deserves attention. The level of exports from the United States and the European Union to the Asian country should also be closely monitored since the intensification by the main exporters tends to increase in the process of resuming Chinese production. Today China accounts for nearly 50% of Brazilian exports and, when adding Hong Kong (which is an indirect way of putting pork in the interior of China) the participation is close to 70%.

As previously mentioned, Brazilian pork production has grown and been aimed at exports, with no excess supply in the national market, which guarantees the balance of prices along the production chain. This is the highlight, considering that the internal demand for meat is impacted by the economic crisis, deepened by COVID-19. The expectation is that consumption will advance more effectively as soon as an effective vaccine against the coronavirus appears, but the pandemic has already caused havoc, such as the deterioration of household income and the increase in unemployment. According to SAFRAS, Brazil’s pork production in 2020 must reach 4.680 million tons, compared to 4.506 million tons in 2019, up 3.9%.