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USDA GAIN: Livestock and Products


12 September 2014

USDA GAIN: Brazil Livestock and Products Annual 2014USDA GAIN: Brazil Livestock and Products Annual 2014

Post forecasts 2015 production and exports of beef to increase by three and ten percent, respectively. This forecast is driven by greater availability of cattle for slaughter, stable domestic cattle prices, and the ongoing depreciation of the Brazilian currency. These factors will likely make Brazilian beef highly competitive in the world market. Pork production and exports are also forecast to increase in 2015 by five and 21 percent, respectively. Driving forces are lower feed costs due to record soybean and corn crops and higher exports due to the weaker Brazilian real and greater demand from the Russian Federation. In general, high indebtedness of Brazilian consumers is the main constraint for a smaller growth path for domestic demand for animal protein.

USDA GAIN: Livestock and Products

Commodities:

Animal Numbers, Cattle

Production:

For 2015, post forecasts an increase of over two percent in cattle inventories and nearly two percent in the calf crop. The expansion of the Brazilian cattle herd is supported by higher investments in productivity. Cattle producers have access to government programs at subsidized interest rates which encourage pasture improvements and higher use of quality genetics. In addition, due to sustained strong cattle prices throughout most of 2014, cattle producers have used more feed and other ingredients during the dry season (normally between May and September when pasture conditions are poor) to maintain cattle weights. In the past 6 months, the increase in feed for beef cattle reached a record of 3.9 million metric tons. It is also estimated that in 2014, cattle raising will attain a profitability rate of 18 percent, two points above the previous year. The estimated increase of 5 percent in feedlots will also likely contribute to larger cattle supplies next year. The sector is also benefiting from an estimated increase in cattle exports due to a weaker Brazilian currency. Finally, there is a possibility of a shift from corn production to investment in improved pastures during 2015 crop year due to lower prices of corn.

Trade:

Post forecasts an increase of over two percent in cattle inventories and nearly two percent in the calf crop in 2015. The expansion of the Brazilian cattle herd is supported by higher investments in productivity. Cattle producers have access to government programs at subsidized interest rates which encourage pasture improvements and higher use of quality genetics. In addition, due to sustainable cattle prices throughout most of 2014, cattle producers use more feed and other ingredients during the dry season (normally between May and September when pasture conditions are poor) to maintain cattle weights. In the past 6 months, the increase in feed for beef cattle reached a record of 3.9 million metric tons. It is also estimated that in 2014, cattle raising will attain a profitability rate of 18 percent, two points above the previous year. An estimated five percent expansion in feedlots will also likely contribute to larger cattle supplies next year. The sector also is benefiting from an estimated increase in cattle exports due to a weaker Brazilian currency.

Commodities:

Meat, Beef and Veal

Production:

Post forecasts that beef production in 2015 will increase by three percent, due mostly to international demand and a small increase in domestic consumption. The depreciation of the Brazilian currency combined with higher cattle supplies is likely to maintain Brazilian beef at competitive prices. Post also estimates an increase in carcass yields due to higher use of feed during the dry season.

Consumption:

Post projects domestic beef consumption to increase by 1.2 percent in 2015 in view of an expected higher inflation rate combined with poor economic growth and higher market prices for beef. The rapid consumer credit growth in Brazil in the past years has been accompanied by escalating indebtedness of consumers.

Trade:

In 2015, post projects an increase of beef exports of 10 percent because stronger demand for the Brazilian product combined with the depreciation of the Brazilian currency which make the Brazilian product more competitive in the world market. Brazilian beef exporters are optimistic about the new “window” of opportunity for higher exports to the Russian Federation in the next 12 months, although this country is already the largest market for Brazilian beef, accounting for one third of all beef exports in 2014. According to local trade sources, the Russian Federation has approved more than 100 Brazilian establishments to export beef and beef products to Russia, including variety beef. Other important markets for Brazilian beef which will exhibit stronger demand are Hong Kong, Iran, Egypt, Venezuela, Saudi Arabia and China. Nearly all markets that suspended or restricted imports from Brazil because of the 2012 atypical BSE case, have reopened.

A major concern of Brazilian beef exports continues to be residue violations for Ractopamine and Ivermectin. According to trade sources, despite the suspension of its use in November 2012, there have been cases of violations for Ractopamine found throughout the country, which jeopardize beef exports to markets such as the Russian Federation, China, Iran, Egypt and Chile. Trade sources also indicated that the use of Ivermectin is another concern that has the potential to affect exports to the United States, despite the recent prohibition of its use in Brazil since early 2014.

September 2014

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