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June 8, 2012

Feed Manufactures in Brazil Looking for Cheaper Alternatives

The high cost of corn and soybeans is resulting in a slower growth in the feed industry in Brazil in 2012 than what was earlier predicted. According to the National Syndicate of Livestock Feed Industries (Sindiracoes), the increase in feed production was expected to be 2.8% in 2012, which would have been about half of the increase seen in 2011. That increase of 2.8% is now in doubt since the prices of corn and soybeans have gone up more than 30% since last year. Sindiracoes estimates that during the period of June 2010 and March 2012, the cost of feeding hogs increased 28% and the cost of feeding chickens increased 35%.

In 2011, the livestock industry in Brazil consumed 12 million tons of soybeans and 37 million tons of corn and in 2012; the consumption is expected to increase only one million tons additionally for each crop. The Brazilian livestock industry in 2012 is expected to consume a total of 66 million tons of rations.

Poultry production in Brazil accounts for 50% of the feed consumption in 2011 and that is expected to increase 3% in 2012. Feed consumption in the swine industry is expected to remain flat in 2012 due to a 4% reduction in pork exports from Brazil compared to last year. The beef and dairy industry combined consume about 8 million tons of rations or approximately 5.6% and 2.7% of the total, respectively.

In order to reduce the overall costs of feeding, some manufacturers are substituting cheaper alternatives for high priced soybean meal. The Agraria Cooperative in southern Parana sells 70% of its feed production to the beef industry and 20% to the dairy industry. Normally, soybean meal composes 20% of the ration, but the cooperative is substituting lower priced cotton meal and peanut meal for 5% to 10% of the soybean meal. They feel they can't replace any more of the soybean meal without compromising the quality of the feed.

The Lar Cooperative in western Parana sells 65% of its production to the poultry industry and it too is trying to save costs by replacing some of the soybean meal with bone meal and enzymes.

The hog industry in Brazil has been hit particularly hard by the combination of high cost and reduced exports. The industry continues to suffer the aftereffects of Russia's surprising prohibition of Brazilian pork exports last year due to perceived sanitary concerns. Brazilian officials have always felt that Russia's concerns about sanitary problems in Brazilian pork processing facilities were just an excuse for protectionist's trade policies. Ironically, at the same time that Russia was prohibiting pork imported from Brazil, the USDA approved Brazilian pork imports into the United States.