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June 4, 2018

Brazilian Meat Processing slowly returning to Normal Rhythm

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

Livestock producers and meat processors in Brazil suffered very significant financial losses as the result of the recent truck driver strike. The official strike lasted ten days, but in a few locations, it actually was extended for a few extra days.

Even today, there continues to be disputes over the freight rates established in the agreement. Many companies argue that the arbitrary freight rates distort the market and are probably unconstitutional. They maintain that the low rates that truckers protested about are the result of an oversupply of trucks in the marketplace. It is unclear how this will be resolved.

Shortly after the strike started, meat processing facilities started to suspend operations because they could not receive animals to process. Those meat processing facilities are now slowly starting to return to normal operations. According to the Brazilian Association of Animal Protein (ABPA), 163 meat processing facilities had resumed activities as of last Friday, but in some facilities, it may take up to 60 days to get back to a normal level of processing.

The slow rate of ramping up production is especially evident where the feed availability was scarce. Millions of birds were lost and it will take a while to get the poultry production cycle back into a regular rhythm. The entire poultry sector suffered steep losses due to lost domestic sales, animal mortality, discarded eggs, logistical costs, lost export contracts, etc.

Beef processing operations that were suspended during the strike are also coming back online. Ranchers are concerned that there will be downward pressure on live cattle prices due to the fact that there will not be an oversupply of live cattle as ranchers try to make up for lost sales by putting more cattle on the market.