War increases meat-packing costs but also opens up space for exports

Russia’s attack on Ukraine has caused global grain prices to rise, consequently affecting the costs experienced by the Brazilian meat-packing industry. Parallelly, an eventual decline in Ukraine’s poultry meat exports opens up a gap that Brazilian meatpackers can fill.

Analysts and representatives consulted by Reuters see the possibility of the EU expediting the process of lifting suspensions that limit meat exports from certain Brazilian meat-packing facilities that have been in place since 2018, given that the Europeans are one of Ukraine’s leading buyers of animal protein.

“Brazil’s productive sector has been preparing to fill gaps and support food security in nations that may be short-supplied due to the likely suspension or decrease in chicken and pork exports from Russia and Ukraine,” commented the Brazilian Animal Protein Association (ABPA in Portuguese).

The organization that represents industry giants like JBS and BRF in Brazil, the world’s leading exporter of poultry meat, assessed that the two countries are important competitors in markets in the Middle East and Europe.

Notwithstanding, Brazil would not be alone in the race for taking up the space left by Ukraine, said the director of Scot Consultoria, Alcides Torres.

“This context may represent an open door for Brazil, but it also opens up space for all global producers,” he noted while commenting that the context may also benefit the US.

He also noted that Ukraine’s chicken meat exports are around 430,000 tonnes a year, a volume that represented about 10% of Brazilian exports in 2021.

In terms of gaining space in the European market, Santing believes it would be a “considerable challenge” if Ukraine stopped exporting meat.

According to ABPA, nearly 20 Brazilian meat-packing facilities are banned from exporting to Europe though they have already completed all requirements for retaking their licenses. A few complaints investigated by Federal Authorities in the “Operação Trapaça” gave rise to these suspensions.

“If Europe really needs Brazilian meat, it is obvious that the meatpackers suspended by Operação Trapaça will be reviewed with speed,” added the director of Scot.

Costs

According to Santin, the effects of the war are still being assessed. The topic of input costs, though, has been concerning the industry for a long time.

According to Lygia Pimentel, director of the consultancy Agrifatto, 34% of the wheat and 15% of all the corn traded globally come from the Black Sea; thus, a disruption in this flow might cause grain prices to rise, then elevating production costs, particularly for chicken and pork, but also for cattle.

Maize accounts for approximately 65-75% of chicken production costs; 60-70 of hog raising costs, and 20-30% of costs for intensive livestock.

“This suggests that chicken production would be the activity most impacted by the decrease in the global trade flow of corn and related inputs, given that producers are already coming off a period in which they had to face major nutritional costs, assessed her.

Since the start of the war in Ukraine, wheat prices, for example, have reached 14-year peaks, and corn has traded at peaks never seen since 2012 on the Chicago Stock Exchange.

Flows

ABPA also warned that its associates have reported that shipping products to the Russian market will be difficult. However, cargoes in transit and close to their final destination, on the other hand, are being internalized “without major obstacles in Russian ports.”

Russia, however, is no longer such an important destination for Brazil. In 2021, there were 106 thousand tonnes of chicken, while pork shipments totaled 9.29 thousand tonnes, and beef sales reached 35.35 thousand tonnes.

Source: Infomoney

To read the full original article please see:

https://www.infomoney.com.br/mercados/guerra-gera-mais-custos-ao-setor-de-carnes-do-brasil-mas-tambem-abre-espaco-para-exportacoes/

Sharing is caring!