Brazilian meatpackers set for tighter margins in 2025

Brazil’s cattle cycle is poised to change in 2025, reducing the supply of animals for slaughter, driving up prices and squeezing profit margins for meatpackers. Major processors may offset these impacts through exports and by diversifying meat offerings, but small and mid-sized slaughterhouses are already feeling the pressure.

According to data from the Center for Advanced Studies in Applied Economics (CEPEA), the price per arroba (a 15-kilogram measure used in Brazilian cattle trading) has surged 23.32% since January through last Friday, and the trend points to further increases next year as the stock of slaughter-ready animals continues to shrink.

Paulo Mustefaga, president of the Brazilian Meatpackers Association (ABRAFRIGO), estimated that, on average, 60% of the country’s beef—destined for the domestic market—comes from small and mid-sized operations. These businesses, he said, will bear the brunt of margin pressures because many of them neither benefit from the strong dollar through exports nor have access to key international buyers, such as China and the U.S.

“The export outlook for next year remained very favorable,” Mr. Mustefaga said. “China will continue buying due to its eating habits, despite the slowdown in its economic growth.”

China’s share of Brazil’s beef exports has slipped somewhat. While it accounted for 48.4% of Brazil’s overseas beef shipments between January and November of last year, its share during the same period in 2024 dropped to 41.1%, according to ABRAFRIGO. Still, China remains Brazil’s top customer.

The U.S., which dramatically increased its purchases and became Brazil’s second-largest beef buyer, has turned into “an unknown,” Mr. Mustefaga said, given the uncertainties around Donald Trump’s administration, set to take office in January.

“They [the U.S.] are going through their own supply reduction process,” he said. “We still don’t know what policies will be put in place and how they might affect not just Brazil but other markets as well. We hope there won’t be any impact, but if there is, the market will adjust with other buyers,” he added.

Gustavo Troyano, an analyst at Itaú BBA, pointed out that exports have historically been more profitable than the domestic market. “With a weakened real, anyone able to export will do so,” he said. “Looking at next year and into 2026, we see a turn in the cattle cycle that could drive cattle prices higher and raise inflationary pressure on beef in the domestic market.”

The big question is how much of that cost increase Brazilian consumers can absorb at the supermarket.

André Braz, an economist at the FGV’s Brazilian Institute of Economics (FGV Ibre), noted that retail beef prices rose 9.63% in the 12 months through November, based on the FGV Ibre’s Consumer Price Index (IPC-M). “Just in November 2024, the price of beef went up by 6.1%, and it could climb further in December,” he said.

If beef prices rise too steeply, consumers might switch to more affordable meat such as poultry and pork, a prospect that favors companies operating in those segments.

Oswaldo Ribeiro Júnior, president of the Mato Grosso Cattle Ranchers Association (ACRIMAT), said domestic consumption largely dictates both beef and arroba prices, “and it won’t tolerate abusive pricing.” He added, “There will be a tug-of-war between meatpackers’ costs and retail prices to decide what the arroba will be, but it’s unlikely to fall below R$300.”

Though cattle prices have dipped this month, João Figueiredo, an analyst at Datagro Pecuária, said it has not changed expectations of higher prices next year. “The arroba should still see more hikes. It’s normal to see a price correction after a strong rally like we had in recent months.”

“The smaller processors, which primarily serve the domestic market, have to pay more for cattle but aren’t earning in dollars nor exporting to China or other large markets,” Mr. Mustefaga of ABRAFRIGO noted. “Those are the businesses that will be hit the hardest.”

Source: Valor International

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