September 6, 2012

Poultry Producers in Brazil ask Government Aid to Move Corn

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

The president of the Brazilian Poultry Producers Union (Ubabef) has indicated that the Brazilian government needs to move at least 3 million tons of excess corn from the center-west region of Brazil to southern Brazil where livestock producers are in desperate need of additional corn supplies. Livestock producers in southern Brazil are reducing their flocks and hog herds due to the high cost of corn and Ubadef feels the additional corn is needed to help stabilize corn prices in the region and keep producers from losing even more money.

According to Ubadef, Brazilian poultry production is expected to fall 10% this year due to the high feed costs and tight credit policies. A 10% reduction would represent a million less tons of poultry for the domestic and export markets. Fifteen of the association's 80 members are in financial difficulty and they have reduced shifts and laid off workers to cut costs. An estimated five thousand workers have already lost their jobs, at least temporarily.

In addition to Ubadef, the governors of all the southern states where the vast majority of Brazil's poultry and hogs are produced have joined with regional and national commodity groups to petition the federal government for immediate action to rectify the imbalance in corn supplies.

Most of the corn in Brazil is in private hands and speculators are taking advantage of the situation to increase corn prices. Exporters are also competing for corn supplies due to the reduced corn crop in the U.S. Brazil exported a record amount of more than two million tons of corn in August, which has further limited the amount of corn available for livestock producers.

Officials from Ubadef feel the government needs to act immediately to increase supplies of corn in the government's warehouses where there is currently only a 15 day supply of corn needed by the poultry industry. They want the government to purchase more corn and then to subsidize at least US$ 1.15 per bushel to help transport the corn from central Brazil to southern Brazil.

For their part, the Ministry of Agriculture has stated that they are monitoring the export of corn, soybeans, and soybean meal to insure that there are ample supplies of the products for domestic consumers.

Poultry producers in Brazil are especially frustrated because the high corn prices are coming at a time when demand for Brazilian chicken is on the rise. The demand is increasing because of anticipated cuts in U.S. poultry production and increased demand from China. China is expected to add 7 more poultry processing plants in Brazil to the list of plants authorized to export poultry to China. An additional eight more plants are expected to be added to the list in the near future.