Exports and low supply underpin cattle prices above BRL 300 most of 2021


Cepea, January 3, 2022


CATTLE – The scenario observed in the Brazilian cattle sector along 2021 was similar to that in 2020, with high exports – mainly to China – and low supply of slaughter cattle. As a result, prices for all the products in the national cattle chain set records in their respective series.


The CEPEA/B3 Index for fed cattle began 2021 at BRL 326.59 per arroba (15 kilograms) – on average and in real terms –, hitting the highest level of the year in February, at BRL 333.96 (monthly averages were deflated by the IGP-DI from November/21). In the following months, the monthly average of the CEPEA/B3 Index continued firm, higher than BRL 300/arroba.


However, in September and in October, fed cattle prices dropped steeply. Values were pressed down by the halt in the Brazilian beef exports to China in early September, after two atypical cases of mad-cow disease in Brazil. In September and in October, the monthly averages (in real terms) closed at BRL 305.10/arroba and at BRL 268.00/arroba, respectively.


In November, despite the unexpected continuation of the Chinese ban on the Brazilian beef, prices resumed rising, influenced by the decrease in the supply of slaughter cattle. In November, the monthly average rose to BRL 297/arroba, practically offsetting the losses from the two previous months.


In the first half of December, with shipments to China still halted, prices continued to rise. On December 14th, the announcement made by the Chinese General Administration of Customs indicating the resumption of beef imports from Brazil by China heartened agents in the Brazilian cattle sector. As a result, the CEPEA/B3 Index hit BRL 329.10/arroba on December 27, the highest daily level, in nominal terms, in the series of Cepea, which began in 1994. The average in December (up to Dec. 27) is 318.62 BRL/arroba, almost 3% up compared to that verified in December 2020, in real terms.


BEEF – Beef sales were low in the Brazilian wholesale market along 2021, due to the weak purchase power of the population in Brazil. Still, the monthly average prices (in real terms) of beef carcass remained higher than BRL 20.00/kg during the whole year. Prices were underpinned by the low supply of slaughter cattle, which prevented beef availability from growing high in the domestic market.


EXPORTS – In 2021, Brazilian beef exports (in natura) were higher than 100 thousand tons until September, when shipments set a record, totaling 187 thousand tons. On the other hand, in October and November, with the Chinese ban, international sales totaled 82 thousand tons and 81.2 thousand tons, respectively, the lowest volumes since June 2018, when a truckers strike prevented goods from reaching the country’s ports. According to data from Secex, between January and November, Brazil exported 1.43 million tons of in natura beef, 9.4% down from that in the same period of 2020.


SWINE – As already expected by agents in the Brazilian swine sector, the international demand for the national pork meat was high in 2021, boosting Brazilian pork exports to record levels. As the purchase power of most people in Brazil has been weak, domestic demand was low, pressing down values for pork meat and live pig. High production costs have marked the year of 2021 too. Besides the sharp valuations for corn and soybean meal, major inputs consumed in pig farming, the prices for electric power and fuel have increased this year too.


INTERNATIONAL TRADES – Despite logistic issues around the world in 2021, majorly related to containers shortages, the Brazilian exports of pork meat set new records in 2021. According to data from Secex, between January and November, Brazil shipped 1.03 million tons of the product, a record and 2.1% up from the total exported in 2020 (1.01 million tons).


China was Brazil’s major commercial partner in 2021, having purchased 51.2% of all the pork meat exported in the year. According to Secex, between January and November, Brazil shipped 503.9 thousand tons of pork meat to the Asian country, 7.5% up from that in the same period last year.


Revenue was a record in 2021 too. Between January and November, revenue in Real was 11.3% higher than that in 2020, totaling BRL 13.05 billion, reflecting both the higher volume exported and the depreciation of the Brazilian currency against the US dollar.


BRAZILIAN MARKET – With the low purchase power of the population in Brazil, pork meat sales fluctuated widely along 2021. Most of the year, however, sales were below the expected by agents, pressing down the values for live pig, pork carcasses and cuts.


Considering live pigs sold in the SP-5 region (Bragança Paulista, Campinas, Piracicaba, São Paulo and Sorocaba), on the average of Jan. 1st – Dec. 27, prices were 13.4% lower (in real terms) than that in the same period last year, averaging BRL 7.24/kg – against BRL 8.36/kg in 2020 – values were deflated by the IGP-DI from Nov/21.


As for special pork carcass, slaughterers reported difficulties to pass on prices and low liquidity most of the year. Thus, from 2020 to 2021 (until Dec. 27), the price for special pork carcass dropped by 0.2%, from BRL 10.69/kg to BRL 10.67/kg (values were deflated by the IPCA from Nov/21).


PRODUCTION COSTS – High prices for corn and soybean meal, major inputs consumed in pig farming, challenged farmers in 2021. On the average between Jan. 1st and Dec. 27th, the ESALQ/BM&FBovespa Index for corn (Campinas, SP) rose by a staggering 45.8% compared to that in the same period of 2020, from BRL 65.60/60-kilo bag to BRL 95.60/bag, in real terms (values were deflated by the IPCA from Nov/21). For soybean meal, values rose by 21.7% in the same region, from BRL 2,125.42/ton to BRL 2,586.12/ton.


Thus, the purchase power of pig farmers in São Paulo decreased steeply between 2020 and 2021, by almost 30% against corn and 17.1% against soybean meal.


Farmers had to deal with increases of other costs too, such as fuel and electric power. According to data released by the IBGE, gasoline prices rose by 50.78% in 12 months, and diesel prices, by 49.56%. Power values increased by 31.87%.


POULTRY – Influenced by high demand in Brazil and from the international market, the domestic prices for chicken meat set real records in 2021. Amid the current low purchase power of the Brazilian population, chicken meat consumption increased during the year, since it is the cheapest compared to its major competitors in Brazil, beef and pork meat.


In the first months of the year, values were weak, as usual for the period. However, from May onwards, demand increased in Brazil, favored by the relaxation of the restrictive measures imposed by the covid-19 pandemic. This scenario added to high exports pushed up domestic prices between May and September.


In September, the average price for whole chilled chicken closed at BRL 8.41/kg in the wholesale market of the Greater São Paulo, a real record in the series of Cepea, which began in 2004 (values were deflated by the IPCA from Nov/21). From October onwards, consumers became unwilling to pay the high prices asked by sellers, reducing demand and pressing down values. Still, in 2021 (considering until Dec. 28), the average price for whole chilled chicken closed at BRL 7.14/kg, a record and 26% up from that in the same period of 2020.


EXPORTS – Despite the decrease in the volume of chicken meat exported to China – which is the top destination for the Brazilian meat – and lower imports from other important commercial partners, such as Saudi Arabia and Hong Kong, the total volume shipped in 2021 is expected to be higher than that in 2020, since other countries increased sharply purchases from Brazil. Besides, the increase in the price paid for the product exported and the strong dollar favored revenue.


According to data from Secex (Foreign Trade Secretariat), between January and November 2021, Brazil exported 4.2 million tons of chicken meat, 9.1% more than that shipped in the same period of 2020. Revenue from these shipments totaled BRL 37.3 billion, 18.9% up from that received in 2020 and a record in the series of Secex, which began in 1997.


PURCHASE POWER – For one more year, Brazilian poultry farmers faced high production costs in 2021. Some relief was brought by high sales of chicken meat, which allowed farmers to raise the asking prices for live chicken. However, these valuations were not enough to raise farmers’ purchase power against the two major inputs consumed in poultry farming: corn and soybean meal.


Compared to soybean meal, Cepea simulations show that the purchase power of poultry farmers in SP was higher in 2021 than in 2020, since the valuation of live chicken was higher than that for soybean meal. Considering the average prices in 2020 and in 2021 (until Dec. 28th), there have been real increases of 35% for live chicken and of 22.8% for soybean meal. On the other hand, for corn, sharp valuations in 2021 (of 46.8% compared to 2020) reduced the purchase power of poultry farmers in SP.


Thus, on the average of 2021 (until Dec. 13), a kilogram of chicken was worth 2.14 kilos of soybean meal in the wholesale market of Campinas (SP), 9.5% more than that in 2020. Considering corn (ESALQ/BM&FBOVESPA Index, Campinas), a kilo of chicken was worth 3.43 kilos of the cereal, 8.6% less than that in 2020.







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