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March 25, 2021

Brazilian Livestock Sector Worried about Record High Corn Prices

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

Livestock producers in southern Brazil are concerned that the very high domestic prices for corn could disrupt the production of poultry and hogs. Corn accounts for at least 50% of the cost of production for poultry and hogs in the state of Santa Catarina, which is Brazil's largest hog producer and second largest poultry producer. The elevated price for corn alone could increase production costs by 25%.

Currently, corn prices in the state of Santa Catarina in southern Brazil are at a historic high of R$ 100 per sack of 60 kilograms (approximately $8.25 per bushel) according to the President of the Poultry Producers Association of Santa Catarina (ACAV). This represents an increase of 72% compared to February of 2020. The price increase for soybean meal is even higher at 113% compared to one year ago. The increased cost of rations, along with higher energy costs, could increase the cost of producing chickens in 2021 by at least 35%.

The livestock sector in the state of Santa Catarina uses approximately 19,000 tons of corn per day, but much of that corn must be trucked in from other parts of Brazil at a very high cost of transportation or imported from neighboring Paraguay. The problem is that the international price of corn is very favorable and exporters are driving up the price of corn in order to meet demand. As a result, domestic supplies of corn in Brazil are very tight and there are additional concerns that the safrinha corn production may be disappointing due to very late planting.

The year 2020 was a good year for the livestock sector in Brazil due to a 30% devaluation of the Brazilian currency and strong demand from China, which drove meat prices to record highs. Profitability in the sector started to erode during the second half of 2020 when corn prices spiked. Producers are hoping that the corn price will return to more normal levels in 2022, but in the meantime, they are urging the Brazilian government to give more incentives to Brazilian farmers to increase corn production.