First semester should be challenging for Brazil’s pork industry

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Porto Alegre, Januery 13, 2021 – The first semester should be challenging for Brazilian pig farming, considering the prospect of high costs, moderate domestic demand, and speculation about China, our largest importer. The market returned slowly after the holidays, with farmers looking for readjustments for live pigs, but slaughterhouses are reticent in terms of negotiations, waiting for signs of more consistent demand.

The sector’s challenge starts exactly with internal demand, which historically evolves at a slow pace in the first months of the year, with a higher degree of indebtedness and household expenses, with payment of annual taxes. Another point concerns the adverse economic environment, with a high level of unemployment in the country, deterioration of household income, besides the uncertainties surrounding COVID-19 and the end of emergency aid, a variable that was boosting consumption in recent months. One point that can stimulate the search for pork cuts in the short term is the upward movement of beef, however, there is the possibility of a greater switch to chicken and eggs.

Faced with the outlook of weakened demand, there is a great need for a high flow of exports for the Brazilian market to find a point of balance, and this variable is deeply linked to China’s level of purchases, a factor that inspires care, evaluating the recent news coming from the Asian giant. China has announced that its pig herd may fully recover in the first half of the year, which would reduce its imports. According to official data, the herd of matrices in China closed last November at 41 million head, and the pig herd surpassed 400 million head. The figures call attention considering the speed, even with the strong investment in the sector, which must result in a more organized and industrial production to the detriment of the colonial standard.

On January 12, the USDA will release a report with prospects for the global pork market. The main focus will be on Chinese data and whether the Department will adjust the numbers or not, in line with the government’s data. There is a big discrepancy in the current data, as in October USDA predicted China’s matrice herd at 31 million head, and the total herd at 340 million head in early 2021. The soybean and corn markets in both the US and China have a very speculative and bullish content around this accelerated recovery of the Chinese herd.

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