Prices of live pigs and pork continue with bullish trend in Brazil

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Porto Alegre, November 19, 2020 – The prices of live pigs and the main wholesale cuts have been on the rise in the country, reflecting the tight supply, explained mainly by the high flow of exports. New readjustments are not ruled out in the last two months in view of the prospect of advancing replacement in the industry’s chain due to year-end celebrations. Besides the festivities, the arrival of wages and bonuses into the economy boosts consumption. An equally important element is the price of beef, which has surged recently and may lead some households to choose more affordable substitute products, thus favoring pork cuts and chicken.

Another important point is the cost of production, a factor that has led farmers to seek corrections for pigs. It is worth mentioning that readjustments can happen for this variable, but it is not the determining factor for the price movement, which is the supply and demand of the sector. However, the price of corn and soybeans can affect the dynamics of animal retention on the farm. Expensive inputs make pigs be traded with lighter weight, thus contributing to adjust the availability of meat in the domestic market, a situation seen over the past few weeks. With the strong appreciation of live pigs, coming close to the level of BRL 10.00 per kilogram in SP and SC, for example, meat-packers may start acting in a more reticent way in short-term negotiations, leaving the environment fierce, trying to prevent livestock highs. Some industry sources even say that it has been increasingly harder to pass on the rising costs to final consumers.

As previously mentioned, the high flow of exports is primarily responsible for adjusting the availability and the current scenario of the Brazilian pig market in 2020. China has made significant purchases in Brazil and other exporting countries, with no signs of deceleration thus far. According to COMEX data compiled by SAFRAS & Mercado, Brazilian pork exports (fresh and processed) reached 87.00 thousand tons in October, of which 46.35 thousand tons went to China. In Jan-Oct/2020, Brazil exported 839.22 thousand tons, up 44.83% from 579.48 thousand tons in the same period of 2019. In 2020, 422.97 thousand tons have already been shipped for the Chinese, which corresponds to 50.40% of total exports. By way of comparison, between Jan-Oct/2019, China imported 182.40 thousand tons of Brazilian pork.

The second-largest importer in 2020 is Hong Kong, with 142.5 thousand tons, which corresponds to a 16.99% share. Besides, a good portion imported by Hong Kong is shipped to mainland China, thus being an indirect form of purchase. Thus, Brazil remains very dependent on China, which deserves great attention, considering that the supply gap caused by ASF will one day be closed in the Asian country (respecting the long production cycle) and affect the flow of shipments. The expectation is that China will continue to buy excellent volumes of pork in 2021 and begin to slow down from 2022 as its production moves forward.

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