August 10, 2012

Strikes Slow Meat Processing and Port Activities in Brazil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

A work slowdown by federal inspectors that started on August 6 has had an immediate impact on meat processors and it could potentially impact grain exports. If the slowdown is not resolved within several days, some poultry and hog processors say that they will have to suspend operations temporarily. Work slowdowns by the federal police are resulting in long lines on Brazilian highways, at airports, and at Brazilian ports. The major grain ports in Brazil are already feeling the effects of prior work slowdowns with very long lines of vessels waiting to load and unload.

The federal meat inspectors are responsible for authorizing the slaughter of animals and the shipments of the processed meat to domestic distributors and exporters. Without their authorization, processing operations cannot continue. Processors are concerned that if the slowdown continues indefinitely, it will impact meat supplies in the supermarkets as well as exports. Brazil is the leading poultry exporter in the world as well as a leading exporter of pork and beef.

The National Grain Exporters Association (Anec) is set to go to court in an attempt to block the grain inspectors from striking or conducting a work slowdown at Brazil's ports. Without the inspectors' authorization, a vessel cannot leave port. The waiting time to berth for vessels at Brazil's main ports is already averaging 35 days compared to the normal waiting time of 10 days. If the inspectors are successful in shutting down port operations, it would be the worst possible outcome for exporters whose customers are already compiling about the long wait times. The potential strike by inspectors is coming on the heels of a work slowdown by fiscal officials and a truck driver strike.

The Minister of Agriculture announced on Wednesday that they are temporarily authorizing state and local officials to take action to insure that meat processors or ports do not cease operations although he did not specify what type of action was being authorized. He stated that the authority for these actions is based on an emergency decree signed by the Brazilian president in July during the midst of a prior strike by fiscal officials. The government has set a limit of 72 hours to liberate cargos from the ports and if the limit is exceeded, they will impose sanctions against the inspectors.

The potential for further delays at Brazil's ports is adding to the frustration of producers and exporters who are already burdened by the under capacity of Brazil's infrastructure and the high cost of transportation in Brazil. Brazil is expected to export 13-14 million tons of corn in 2012, but that is a very lofty goal given the chronic congestion at Brazil's ports. If federal inspectors succeed in slowing down port operations, than that goal may be nearly impossible to achieve.