December 31, 2012

Poultry Producers in Parana Petition Brazilian Gov. for Assistance

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

While soybean and corn producers in Brazil are pleased with the prices they are receiving for their crops, livestock producers are having the opposite reaction. High feed costs have put many of them into the red and they are asking the federal government to step in to help control feed costs.

Poultry producers in Parana for example have been hit hard by the increase in corn and soybean prices which accounts for 70% of the feed rations. In August, a number of livestock organizations in the state of Parana petitioned the federal government for help in controlling spiraling feed costs.

They want the federal government to step up their program of subsidizing the cost of transporting corn from Mato Grosso to southern Brazil. There are ample supplies of corn in Mato Grosso, but transporting the corn to southern Brazil is prohibitively expensive. The federal government has brought in a small amount of corn, but the poultry producers are requesting that the program be expanded significantly.

An additional problem for the industry is a lack of credit for poultry producers. Since the worldwide financial crisis of 2008, there has been a lack of credit availability for poultry producers and it has gotten worse with rising feed costs. In the past, poultry producers usually had 40 days to pay for their corn or soybeans meal purchases, but with the recent prices increases for corn and soybeans, producers now have to pay in advance for their feed supplies or pay with cash at the time of the purchase. Therefore, one form of help they requested from the government was an increase in production loans with an interest rate of 5.5% and up to 6 years to pay back the loans.

Thus far, the federal government has not responded to their request for federal aid.

Sixteen organizations associated with the poultry sector in the state of Parana have also sent a letter to the state legislature in November explaining how the credit crisis has impacted a vitally important industry in the state. The president of the Syndicate of Poultry Producers and Industries in Parana (Sindiavipar) indicated in the letter that poultry accounts for the second largest export product from the state only surpassed by soybeans.

In the state of Parana, the poultry sector employees 650,000 workers both directly and indirectly, which represents 7% of the state's population. The state has 43 industries associated with poultry production including incubators, feed manufactures, equipment suppliers, processors, etc. and that there are 18,000 poultry producers in the state. Since the poultry sector is such an important segment of the state's economy, Sindiavipar feels that the state legislature needs to find a way to keep the industry viable.

Poultry exports from Parana have been on a steady increase for the last five years, but the value of the exports declined in 2012. Even though poultry exports increased 4% in 2012, the value of the exports declined 13% because importers opted for the cheaper products in 2012. This decline came as a surprise for the industry because of the steady gains in recent years. In 2011 for example, the value of the poultry exports increased 16.5% compared to 2010, which was more than double the overall growth of the Brazilian economy during the same period which was 7.5%.

The president of Sindiavipar is optimistic about the industry in the long run, but he feels immediate measures need to be taken in the near term to stabilize the sector. If not, producers will continue to cut back on production resulting in higher poultry prices for consumers.