Russia’s attack on Ukraine has caused a spike in global grain prices that affect the costs of the Brazilian meat industry, but an eventual decline in Ukrainian exports of chicken meat opens a gap that can be filled by Brazilian meatpackers.
Analysts and industry representatives consulted by Reuters also see a chance of acceleration in negotiations to lift suspensions at Brazilian units embargoed by Europeans since 2018, as the European Union is one of the main buyers of animal protein from Ukraine.
“The productive sector has been preparing to fill gaps and support food security in nations that may be short of supplies due to the likely suspension or decrease in exports of chicken and pork from Russia and Ukraine,” the Brazilian Association of Animal Protein.
In the assessment of ABPA, which represents giants such as JBS and BRF in Brazil, the largest global exporter of chicken meat, the two countries in conflict are relevant players – and Brazilian competitors – in important markets in the Middle East and Europe.
“There may be a gain in competitiveness”, said the president of ABPA, Ricardo Santin.
Brazil, however, would not be alone in the dispute for markets that eventually cease to be served by Ukraine, said the director of Scot Consultoria, Alcides Torres.
“An opportunity opens up for Brazil, but it also opens up for all global producers,” he said, noting that the United States can also benefit.
Ukraine’s chicken meat exports are around 430,000 tonnes a year, a volume that represented about 10% of Brazilian exports in 2021, he noted.
Regarding Europe, Santin believes that this will be a market with a “great challenge”, if Ukrainian exporters stop shipping meats due to the difficulties imposed by the war.
According to the association, there are about 20 Brazilian units suspended by the Europeans, who have already fulfilled all the necessary requirements for retaking their licenses. The suspension came in the face of complaints investigated by the Federal Police’s Trapaça operation.
“If Europe really needs Brazilian meat, it is clear that these slaughterhouses suspended by Operação Trapaça will be reviewed with speed”, added the director of Scot.
Ukraine has implemented export licenses for products such as chicken and eggs, Interfax said on Sunday, after the country suspended shipments of key commodities such as sugar, rye, oats.
costs
Santin stated that the impacts of the war are still being analyzed, but the issue of expenditure on inputs, which already worried the industry, is a point of attention.
“We are looking closely at how this will be handled. The biggest effect in the short term is the cost increase and the reflection on the grains,” she said.
Of everything that is traded globally, 34% of wheat and 15% of corn come from the Black Sea, so an interruption in this flow would lead grain prices to appreciate globally, raising production costs, especially for chickens and pork. , but also of cattle, evaluated the director of the consultancy Agrifatto, Lygia Pimentel.
About 65-75% of chicken production costs are associated with maize, while in swine this ratio is between 60-70%, and in intensive livestock between 20-30%.
“This indicates that chicken production would be the activity most impacted by the reduction in the global trade flow of corn and related inputs, considering that producers are already coming from a period of relevant and positive impact with nutritional costs”, she said.
Since the start of the war in Ukraine, wheat prices, for example, have reached 14-year highs and corn has traded at peaks since 2012 on the Chicago Stock Exchange.
Internally, the Esalq/B3 corn indicator shows that cereal prices, for example, still do not reflect the volatility seen abroad. The index closed at 98.15 reais per bag on Friday, an increase of only about 1% since the beginning of the war.
Stonex analyst João Pedro Lopes said that prices are not experiencing major fluctuations in the domestic market because the industry is reluctant to accept to pay the valuations reflected in the international market, considering that corn is already at levels close to historic highs in the country.
“It will depend a lot on the completion of the off-season, if there is any break, it is possible that the local consumer will accept higher prices, so I think it will depend on the off-season”, he commented, referring to the second harvest, the largest in the country, which is still being planted.
flows
ABPA also warned that its associates have reported expected obstacles to shipping products to the Russian market. However, cargoes that are in transport and close to their final destination 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 tons of chicken, while pork shipments totaled 9.29 thousand tons, and beef sales reached 35.35 thousand tons.
Source: CNN Brasil
