BRF to export more in China due to swine flu

Since the African swine flu devastated pig herds in China, pork prices have soared in the country forcing it to increase imports to meet demand.

More than 1.1m pigs have died or been killed as authorities struggle to contain a virus that has spread to neighboring countries since the first cases emerged in August 2018 and for which there is no vaccine.

But the number is believed to be much higher, as official data show China’s herd of pigs totaled 347.6m in the first half of the year, down 60m from the same period last year. Pork prices rose only a fifth in June.

China is the country that produces and consumes pork more than anywhere else in the world.

To meet demand, Beijing has increased pork imports, with EU shipments rising by 37% between January and April, according to data from the European Commission. Brazil has also become a major source of imports.

China is importing only frozen pork and the meat goes to the big cities. Prices, meanwhile, could rise as much as 40% over the next six months, according to a Nomura banknote.

BRF aims for China

Faced with this situation, BRF SA expects to receive up to four new export licenses soon to sell chicken and pork to China, which could help the Brazilian processor to reverse three consecutive annual losses.

BRF lost a total of R$5.9bn (US$1.58bn) until 2018. According to BRF’s chief executive, Lorival Luz, a Chinese delegation is visiting several Brazilian fridges this week and next.

If the BRF plant in Lucas do Rio Verde gets permission to sell to China, Luz said the company could increase chicken and pork exports to that destination by about 30%.

African swine flu in China raised BRF pork exports to Asia by up to 30% by the end of the second quarter. The volumes are likely to rise when new export licenses are issued, according to the BRF chief executive.

BRF began an effort last year to get a turnaround in its business, which involved asset sales to reduce debt, a reduction in raw material inventories, and a 5% reduction in its Brazilian workforce to adjust capacity to demand.

Luz said the recovery continues and should help BRF to generate cash in the future without the need to sell more assets.

In addition to boosting exports to China, BRF is also interested in finding a partner to produce beef locally in Saudi Arabia, as the halal Gulf market is a priority.

Luz visited the Gulf region in the first semester and hopes to return in the second since no decision was made with his local business partner.

The following DataLiner graph shows Brazil’s pork, beef, and chicken export trends to China from January 2015:

Sources: Reuters and Mercopress

Sharing is caring!