Executive Summary

Although uncertainty remains regarding the outlook for world economy, post forecasts broiler production and trade to increase in 2010 reflecting a general opinion among economic analysts that Brazil’s economic growth is expected to rebound by nearly four per cent in 2010.

Post revised broiler production and trade in 2009 to reflect new estimates made by trade sources. Broiler production is likely to decrease by half a per cent and exports by nearly five per cent, assuming FAS methodology to exclude exports of chicken feet. Domestic consumption is estimated to increase by 1.5 per cent, as compared to 2008. Post also revised turkey production and exports to reflect above changes.

Production

The outlook for 2010 calls for an increase of four per cent in production and five per cent in exports reflecting a general optimism among producers and analysts that the Brazilian economy will rebound by four per cent. Trade sources also expect world demand for broilers to improve and that Brazil will begin to export to new markets, such as China.

Post revised downward broiler production in 2009 to 10.9 million metric tons, half per cent below last year’s record production of 11 million metric tons. Broiler growers responded early in the year to industry leader’s exhortations to cut back production by 20 per cent during the first quarter of 2009, but the actual decline was only three per cent. Trade sources say that producers’ higher profit margins derived from lower input costs, primarily corn prices and stable exports combined with firm domestic demand contributed to increased production. However, the outlook for the second half of the year is changing with lower exports and lower broiler prices received by producers and this will likely result in further production cuts.

Production costs

Post projects feed prices to remain stable during the 2009-10 crop year (1 October/30 September), with a record soybean crop and stable corn production. The new crop plan announced by the federal government maintains the same volume of subsidized funds available to producers to finance their production costs. Also of note is that trade sources estimate that up to 18 per cent of the 2009/10 corn crop is likely to be biotech corn which is expected to increase yields.

Sao Paulo: Broiler production costs and wholesale prices for broilers (RTC), corn and soybean meal

Consumption

Post revised broiler consumption in 2009 to reflect slower growth in the Brazilian economy combined with a higher rate of unemployment. However, the current retail price of broilers in the local market is competitive with pork and beef and will offset somewhat competition from these other animal proteins.

Trade

Post forecasts broiler exports to increase by five per cent in 2010. Our forecast is based on higher world demand for broilers and an increase to newly open markets, such as China. Based on conversations with trade sources, Post has included in our PSD an estimated 172,000 metric tons for Brazilian chicken exports to China by the end of 2010. Exports of broiler meat to India remain uncertain.

Trade sources indicated to Post that broiler exports in 2009 will drop by nearly two per cent. However, assuming FAS methodology of excluding chicken feet and chicken variety cuts, Post estimates exports to drop by nearly five per cent from last year’s level. The drop in exports in 2009 reflects the impact of the credit crunch on broiler demand from most traditional markets for Brazilian broilers, such as Japan, Saudi Arabia, Russia and Hong Kong. It reflects also the impact of devaluation of the dollar compared to the Brazilian Real. Despite the progress made by Brazilian officials to open new markets in China and India, basically no exports to these markets are expected in 2009.

Policy

Although waiting for the approval of Brazil’s antitrust agency (CADE), Brazilian processed meat companies Sadia and Perdigao merged last month (August 2009), becoming a force to rival major US food names in global markets. Sadia and Perdigao already have a commanding presence in the Middle East and Europe, which absorb 42 per cent of their combined exports. The new company, Brasil Foods (BR Foods), hopes to expand that reach. The combined forces of Sadia and Perdigao translate into some BRR22 billion ($11.6 billion) in annual sales. The new company will account for 70 per cent of both hog and poultry slaughter in Brazil.

Further Reading

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