May 21, 2012

More Cattle Continue to be Placed on Feed in Brazil

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

One of the most important trends in cattle ranching in Brazil in recent years has been the increased use of feedlots to fatten cattle before slaughter. The trend is especially evident in the state of Mato Grosso, which has the largest cattle herd in Brazil of approximately 30 million head.

In 2012, Mato Grosso is expected to have 929,000 cattle placed on feed prior to slaughter. This is up from 813,000 in 2011 and 592,000 in 2010. In other words, the number of cattle placed on feed increased 57% in just the last three years. These figures are from the Mato Grosso Institute of Agricultural Economic which conducted a phone survey of 140 feedlot operations in the state.

According to the Mato Grosso Association of Ranchers (Acrimat), the ranchers in the state are still suffering the results of a very severe dry season in 2010 that resulted in many pastures completely dying. These ranchers have not been able to renovate their pastures due to a lack of available credit and therefore the best way to maintain their cattle numbers or to increase their production has been to place more cattle on feed.

There is also another trend at work as well and that is the recent consolidation of the meat packing industry in the state. Only a few companies now control the industry and the lack of competition has resulted in lackluster cattle prices for ranchers. There are parts of the state where a single company has a 100% market share and they are offering very low prices for cattle.

These low cattle prices continue to encourage ranchers to convert some of their pastureland to additional production of soybeans and corn. Domestic soybean prices are at record levels and ranchers feel they can make more money growing soybeans and corn than they can with cattle ranching. Therefore, as the amount of pasture declines, more and more cattle are placed on feed. Some of the biggest increases in cattle on feed numbers have been precisely where there is no competition between meat packers.

These feedlot operations were not possible just a few ago due to a lack of corn in the state. That corn shortage has been solved by the huge increase in safrinha corn production which is now being used for cattle feed. Over the last few years, nearly eight hundred thousand hectares of pastureland has been converted to soybean production and many of the soybeans in the state are followed by a second crop of corn. In fact, the state is expected to produce over 11 million tons of safrinha corn in 2012, which is an increase of 60% compared to a year earlier.