May 20, 2011

High Feed Costs, Strong Currency Worry Brazilian Poultry Produers

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

Poultry producers in the state of Santa Catarina, which is the largest poultry producing state in Brazil, have seen their profit margins shrink due to the high price of corn and the strong Brazilian currency. The high price of corn directly affects their production costs and the strong Brazilian currency has eroded their competitive advantage when it comes to exports.

The average price of a sack of corn (60 kilograms) in Brazil during the month of April was R$ 30.26 per sack which is as much as double the price of one year ago. Most of the poultry and swine in Brazil are produced in the three southern states of Parana, Santa Catarina, and Rio Grande do Sul yet the region is deficit in corn production. Corn must be trucked into the area from other regions of Brazil at very high transportation costs. One of the reasons for the deficit is the fact that farmers in southern Brazil have opted to grow less corn and more soybeans over the last several years due to the higher profit margins associated with soybeans. That may change in 2011/12 as farmers in southern Brazil are expected to increase their full-season corn acreage.

The president of the Santa Catarina Poultry Association (ACAV) feels that the cost of corn and the Brazilian currency makes Brazilian poultry similar in cost to that of North America. In spite of the strong currency situation, Brazilian poultry exports continue to increase. The total value of Brazilian poultry exports in April was US$ 689 million, which was 28% greater than during April of 2010. The total volume of Brazilian poultry exports in April was 325,000 tons, which was 5% more than April 2010.

Chicken parts account for 50% of Brazilian poultry exports followed by whole chickens at 36%, seasoned chicken at 6%, and processed chicken at 5%. The largest importer of Brazilian chicken is the Middle East (116,000 tons in April) followed by Asia (92,000 tons), European Union (45,000 tons), Africa (33,000 tons), and the Americas at 22,000 tons in April.

The state of Santa Catarina is the largest exporter of poultry in Brazil accounting for 89,250 tons during April valued at US$ 209 million. In second place is the state of Parana with 89,200 tons of exports valued at US$ 177 million. Third place is occupied by Rio Grande do Sul at US$ 121 million during the month of April.