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Pork, Chicken Prices Begin to Rise, Beef Maintained

6 August 2012, at 10:01am

BRAZIL - After pressure from excess supply and disappointing demand from foreign markets in the first half of the year, prices of chicken meat and pork have began to react to soaring prices of corn and soybean meal, the main inputs for the production of feed.

The trend however does not apply to beef which is to be maintained at low levels due to increased availability of livestock for slaughter.

In July, a kilo of chicken carcases at wholesale in Sao Paulo rose 1.4 per cent, to $2.84, according to Scot Consulting. The jump was even higher for pork which, encouraged by support measures announced by the federal government, increased 7.4 per cent to R $ 3.59 a pound.

"Recovery in progress must be sustained at least in the coming weeks, as producers of chicken and pork, notably the South, are still working with negative margins. "What we're seeing is that the high cost of corn and soybean meal imposes a need to push prices. It is a beginning of recovery," said Heloise Xavier, an analyst at Agricultural Advisory Jox.

To cope with rising costs and escape injury, the poultry and hog producers are reducing production volumes. Between January and June this year, amid high inventories and weak demand for exports, chicken producers have reduced the housing of broiler chicks by 1.8 per cent, according to Cesar Castro Alves, the MB Agro. With high production costs, caused by the breakdown of corn and soybeans in the United States, the adjustment of supply will be repeated at a higher intensity in the second half of the year.

"Almost all poultry agribusinesses have been warned that they should reduce by about 10 per cent levels of production to prevent more damage. Today, the production cost is $2.10 and the product is sold at $1.90," said the chief executive of the Brazilian Poultry Union (Ubabef) Francisco Turra. "These measures will be reflected in a lower availability of meat," agrees Heloise, the Advisory Jox.

With the increasing availability of animals for slaughter, live cattle contracts at BMF & BOVESPA for November show a downward trend.

Despite the expectations, inflation worries the government. "If the scenario continues the way it is today, for sure we will have a significant impact on food price inflation," a source said Bank of Brazil. According to this assessment, the rise in prices of agricultural commodities should pull up inflation with food in Brazil this year and also next year.