November 17, 2011

Poultry Prod. Expands in Southern Brazil, Consumes More Corn

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

In spite of high feed costs and a strong currency, poultry production in Santa Catarina continued to expand in 2011. The state of Santa Catarina is the second largest poultry producer in Brazil and the largest exporter of poultry products. According to the president of the Santa Catarina Poultry Producers Association (ACAV), Clever Pirola Avila, the state's poultry production will increase 4% in 2011 and gross receipts will increase 6%.

The poultry industry in Santa Catarina consist of 13,000 producers, 77% of which are considered agribusiness involved with vertically integrated production. The industry employs 40,000 workers directly and 80,000 indirectly. The total chicken production in the state in 2011 is 700 million and the industry gross receipts in 2011 are in excess on one billion dollars.

The two biggest concerns for poultry producers in 2011 was the high cost of corn and soybean meal and the strong Brazilian currency compared to the dollar. Corn prices in 2011 soared to near record highs due to strong international demand, increased ethanol production, and disappointing corn yields in the United States. Domestic corn prices in Brazil also reached near record levels and Brazilian farmers are responding by significantly increasing their 2011/12 corn acreage.

The full-season corn acreage in southern Brazil is expected to increase by as much as 10% in 2011/12 and the safrinha corn acreage is also expected to increase significantly as well. As a result, corn production in Brazil is expected to surpass 60 million tons, which is good news for poultry producers after two years of falling corn production.

Southern Brazil is a corn deficit region and much of the corn consumed in southern Brazil must be brought in from central Brazil at a very high cost. There is no direct rail or barge link between the two regions and the corn must be transported by trucks over poorly maintained roads. As a result, the poultry producers in southern Brazil, as well as the swine producers, continue to press the government to improve the infrastructure linking the two regions by building a railroad and expanding the existing highway system. They also want the government to finance improvements at the ports to increase capacity and reduce the cost of exporting their poultry products.

In lieu of these improvements, they are petitioning the federal government to provide assistance in transporting the grain from central Brazil similar to what is currently being done for livestock producers in northeastern Brazil.