Porto Alegre, December 17, 2020 – The year 2021 promises to be challenging for Brazilian pig farming due to the cost picture, mainly in the first semester. Corn tends to present a situation of stress and high prices in the country in the first months of the year with a smaller summer crop and logistics concentrated on soybeans. Another important variable for the sector next year is the export pace, which will be dictated by the pace of purchases from China.
Brazilian exports must show excellent performance, considering the large supply gap present in the Asian country, a consequence of ASF. However, it is worth noting that the cases of ASF have drastically reduced in China, which, together with the high prices of meat and live pigs in its territory, will encourage the search for the replenishment of herds, thus, the Chinese import curve must start to decline from the end of 2021 to 2022. The Chinese government has been setting ambitious goals, besides giving great financial stimuli for the expansion of its production, moving from a colonial approach to a more organized and industrial activity, increasing productivity and advancing on the issue of biosafety.
Brazilian farmers must pay attention to this point, not aggressively expanding housing in 2021. Other markets around the world cope with matrices at record levels, as is the case in the United States, and must impact prices as soon as China slows down its purchases. Brazilian farmers have already increased the herd of matrices this year, even with a severe cost environment, aiming to meet the Chinese demand in 2021. According to SAFRAS & Mercado, Brazilian pork production must reach 4.91 million tons, an increase of 2.8% from 4.78 million tons in 2020. It is worth mentioning that production costs must impact retention within farms in the first months of the year, and lighter animals end up reducing the volume of pork available, otherwise the number would be even higher.
Many pieces of news related to the Chinese herd are beginning to contaminate the world market at this time, which may lead to the renegotiation of contracts, according to market rumors, besides reports by Chinese authorities regarding the occurrence of the presence of COVID-19 in lots of meat and packages that are arriving their territory. The Chinese government recently announced that the number of matrices reached 38 million head and can be fully restored to pre-ASF levels by the second quarter of 2021. This figure draws great attention, considering the long production cycle and the presence of ASF in provinces of the country until a few months ago.
The price of pigs and pork has indeed shown a sharp downward movement in the Chinese market recently, but that so happened because the country bought sharp volumes, including pork and beef, already as a preparation for its main holiday, the Lunar New Year. A counterpoint is the USDA’s figure released in October, which points to matrices at 31 million head early next year, volume that respects the activity cycle. Anyway, this is a variable that deserves great attention given the great contrast amid information sources and that can bring surprises to markets around the world in 2021. All the main world exporters (the United States, Canada, European Union, and Brazil) are dependent on Chinese purchases, with the risk of major price depression if purchases are not confirmed.
For Brazilian pork exports next year, the projection is 1.137 million tons, an increase of 12.6% over the 1.010 million tons of 2020. A limiting factor for a stronger movement of shipments from Brazil is the number of mills accredited to export to China, which are likely to operate with high capacity in 2021. The accreditation of new units would be necessary, hindered by the issue of ractopamine, used in much of Brazil but not accepted in the Asian country.
Exports are key to the balance of the Brazilian market, especially in a scenario of expansion of production, considering that the economic environment will remain adverse, affecting demand, despite the expected recovery after COVID-19, with a high level of unemployment and depressed income of the population.
Agência SAFRAS Latam
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