Report Highlights:

Post forecasts both beef and pork production to increase by two percent in 2016 to 9.6 million metric tons and 3.5 million metric tons, respectively. The increase in production is mostly driven by higher export demand due to the depreciation of the Brazilian currency. Both animal proteins suffer the impact of the current economic recession in the country and reduced purchasing power of consumers due to the high level of indebtedness of Brazilians and rising inflation and unemployment rates. However, due to high beef prices in the domestic market, domestic pork consumption shows a better outlook.

Executive Summary:

The outlook for the Brazilian economy in 2016 is to continue in recession. Post has revised its production and consumption forecast of both beef and pork due to the following constraints: unpopular government cuts and tax hikes, rising inflation, rising unemployment, rising interest rates and lower consumer confidence. If the current political crisis continues through next year, it may result in Brazil's losing its investment grade which further aggravates the economic outlook. On the positive side, Post expects higher exports of both beef and pork due to the depreciation of the Brazilian currency, but the export outlook can be tempered by a drop of oil prices in some of the most important Brazilian markets for beef and pork, such as Russia. During January-August 2015, the Brazilian currency depreciated by 33.2 percent, which makes Brazil's beef and pork more competitive in the world market.

Animal Numbers, Cattle

Production:

Post forecasts a continued outlook of limited cattle supplies for slaughter in 2016. Due to the insufficient volume of rains for nearly two years that is affecting the most important cattle producing areas in the center-west regions, higher prices of calves (up 25 percent from a year ago) are stimulating retention of animals by Brazilian producers. Because of high cattle prices in Brazil, packers closed more than 30 plants in several states mostly because their margins reached critical levels. The state of Mato Grosso, which has the largest cattle herd in the country, closed 9 plants that were operating at idle capacity due to the limitation of cattle supplies. The outlook for production is expected to improve only in 2017.

Trade:

Post forecasts a small increase in cattle exports in 2016 mostly due to a recovery in exports to Lebanon and other markets in the Middle-east due to the continued depreciation of the Brazilian currency. Also, recently, Brazil opened the market for live cattle exports to Turkey. Exports to Venezuela will likely remain low due to default risks as a result of the deterioration of the economic situation in that country and continued high cattle prices in Brazil.

Animal Numbers, Cattle

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

Brazil

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Total Cattle Beg. Stks

207959

207959

213035

213035

0

219093

Dairy Cows Beg. Stocks

38600

38600

38980

38980

0

39290

Beef Cows Beg. Stocks

53660

53660

54210

54210

0

55025

Production (Calf Crop)

49600

49600

49900

48220

0

48250

Total Imports

10

10

10

3

0

3

Total Supply

257569

257569

262945

261258

0

267346

Total Exports

649

649

400

300

0

300

Cow Slaughter

10585

10585

10700

10600

0

10500

Calf Slaughter

350

350

300

300

0

300

Other Slaughter

29450

29450

29600

27465

0

27900

Total Slaughter

40385

40385

40600

38365

0

38700

Loss

3500

3500

3300

3500

0

3500

Ending Inventories

213035

213035

218645

219093

0

224846

Total Distribution

257569

257569

262945

261258

0

267346

(1000 HEAD)

Meat, Beef and Veal

Production:

Post forecasts beef production to increase only by two percent in 2016 to 9.6 million metric tons (MT/CWE), mostly driven by higher export demand since domestic demand will likely remain stagnant. Limited supplies of cattle for slaughter and high cattle prices will also continue to pressure packer's profit margins in 2016. Although a large number of plants have closed down this year, trade sources believe that more inefficient plants can be closed in certain areas of the country. Two important constraints can also adversely impact beef production in 2016: power shortages and higher energy costs, including a possibility of energy rationing as the hydric crisis is expected to continue throughout next year. Nearly 70 percent of Brazil's energy is hydric.

Consumption:

Post projects domestic beef consumption to remain stagnant in 2016 at 7.8 million metric tons (MT/CWE), in view of the continued higher consumer prices for beef. In addition, the outlook for the economy in 2016 remains weak with rising inflation, rising unemployment, rising interest rates, and the escalating indebtedness of Brazilian consumers which is affecting consumer's confidence. Consumer confidence in Brazil plunged in July 2015 to the lowest level since the data series began in September 2005. The higher cost of retail beef cuts also makes Brazilian consumers to switch to other meats, such as chicken and pork. In 2015, the price difference between retail beef cuts and chicken is above 60 percent higher for beef.

Trade:

Beef exports are expected to rebound in 2016 at a rate of nearly 10 percent to nearly 1.8 million metric tons (CWE), mostly driven by the devaluation of the Brazilian currency and higher demand from Asia. The Brazilian currency was devaluated by 33.2 percent since August 2014.

China and Hong Kong: The government announced the suspension of the embargo of Brazilian beef to China several months ago and since June; eight plants began to export to China. However, Brazilian exporters do not expect that beef exports to China will increase significantly in 2015, but are optimistic that before the end of the year another nine plants will be authorized to export to that country, which likely will boost exports in 2016. Meanwhile, Brazilians believe that a decline in beef exports to Hong Kong is because of the increased Chinese surveillance over meat trade to avoid "triangle" operations. But, traders expect Hong Kong to continue as a major importer of Brazilian beef.

Russia: Local trade sources are more cautious about the Russian market in 2016 due the economic crisis, devaluation of the Ruble and lousy oil prices. However, because of the estimated lower beef stocks in Russia, Post was informed that the Russian Federation will likely remain as the largest market for Brazilian beef in 2016, but at lower levels.

United States: Brazilian beef exporters expect to begin exports of fresh and frozen beef to the United States in the first quarter of 2016. Currently, government officials from both governments are working on the requirements. Brazilian exporters expect to ship in 2016 about 60 percent of the U.S. quota of 64,805 metric tons (PWE) available to other countries. Exports of processed beef will increase slightly in 2016.

Other markets: South Africa, Iraq, Malaysia, Myanmar and Singapore not only resumed beef imports from Brazil, but mutual negotiations between these countries and the Brazilian government are centered in the eligibility of new Brazilian plants for exports. Saudi Arabia and Japan, which embargoed Brazilian beef because of the outbreak of Bovine Spongiform Encephalopathy (BSE) in Parana in late 2012, are reported to open their markets before the end of 2015. Other negotiations to open market access for Brazilian beef are concentrated in Thailand, Taiwan and Indonesia.

Meat, Beef and Veal

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

Brazil

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Slaughter (Reference)

40385

40385

40600

38365

0

38700

Beginning Stocks

0

0

0

0

0

0

Production

9723

9723

9820

9425

0

9615

Total Imports

82

82

90

60

0

55

Total Supply

9805

9805

9910

9485

0

9670

Total Exports

1909

1909

2005

1625

0

1790

Human Dom. Consumption

7896

7896

7905

7860

0

7880

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

7896

7896

7905

7860

0

7880

Ending Stocks

0

0

0

0

0

0

Total Distribution

9805

9805

9910

9485

0

9670

(1000 HEAD) ,(1000 MT CWE)

Meat, Beef and Veal

Time Period

Jan-Jun

Units:

Metric Tons

Imports for:

2014

2015

U.S.

0

U.S.

0

Others

Others

Argentina

3,235

2,804

Australia

1,336

2,052

Paraguay

12,914

13,664

Uruguay

6,320

4,395

Total for Others

23,805

22,915

Others not Listed

1

0

Grand Total

23,806

22,915

HTS: 0201,0202,021020,160250

Quantity in Product Weight Equivalent (PWE)

Updated: August 25, 2015

Export Trade Matrix

Country

Brazil

Commodity

Meat, Beef and Veal

Time Period

Jan-Jun

Units:

Metric Tons

2014

2015

U.S.

9,449

U.S.

17,693

Others

Others

Angola

10,270

7,626

Algeria

11,363

12,920

Canada

1,736

603

China

79

3,736

Chile

26,448

66

Egypt

66,973

85,346

European Union

48,427

47,621

Hong Kong

114,907

89,134

Iran

51,024

49,836

Iraq

0

0

Israel

5,459

6,613

Lebanon

8,237

6,543

Libya

10,477

4,514

Japan

0

0

Jordan

6,037

8,038

Phillippines

6,674

6,051

Russian Federation

143,250

89,841

Saudi Arabia

0

0

Singapore

6,694

8,362

Ukraine

0

0

UAE

9,147

9,548

Venezuela

83,228

44,095

Total for Others

610,430

480,493

Others not Listed

27,994

48,713

Grand Total

647,873

546,899

HTS:0201,0202,021020,160250

Quantity in Product Weight Equivalent (PWE)

Updated: August 25, 2014

Animal Numbers, Swine

Production:

Post forecasts hog production to increase by one and half percent in 2016 to support higher pork exports since domestic demand remains slow. After the negative impact of high feed costs in 2012, when Brazilian hog producers downsized their herd, swine production is on the rise again with more investments and strong technological support from large packers combined with relative low prices of feed and higher returns. Brazilian Producers also benefited from the outbreak in 2014 of Porcine Epidemic Diarrhea (PED) in the United States and Canada, which increased global pork prices and demand for Brazilian pork.

Nearly 60 percent of hog production in Brazil is concentrated in the three southern states of Santa Catarina (which is the only state in Brazil free of Foot-and-Mouth Disease without vaccination), Parana and Rio Grande do Sul, and production is highly vertically integrated.

Animal Numbers, Swine

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

Brazil

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Total Beginning Stocks

38844

38844

39395

39395

0

40153

Sow Beginning Stocks

2910

2920

2890

2930

0

2940

Production (Pig Crop)

38470

38470

39050

39050

0

39635

Total Imports

0

0

0

0

0

0

Total Supply

77314

77314

78445

78445

0

79788

Total Exports

3

3

3

3

0

2

Sow Slaughter

160

150

160

160

0

160

Other Slaughter

36657

36650

36940

37037

0

37460

Total Slaughter

36817

36800

37100

37197

0

37620

Loss

1099

1116

1092

1092

0

1100

Ending Inventories

39395

39395

40250

40153

0

41066

Total Distribution

77314

77314

78445

78445

0

79788

(1000 HEAD)

Meat, Swine

Production:

Post forecasts an increase of nearly two percent in pork production in 2016, at 3.5 million metric tons (MT/CWE). This forecast reflects the current optimism of the pork industry with a rebound in the export markets and a marginal increase in domestic demand. Packers are also confident due to expected lower feed costs and sustainable domestic and export prices next year. Improved weights are also helping increasing in production. However, the devaluation of the Brazilian currency, although helps pork exports, can adversely impact on production costs this year, mostly on imported medications and additives. Another constraint that could impact pork production next year is the worsening of the hydric crisis in the Center-south of Brazil and the impact on energy prices.

Consumption:

Post forecasts an increase of nearly two percent in domestic consumption of pork, at 2.9 million metric tons (MT/CWE), as Brazilian consumers will likely remain price conscious in 2016 due to firm market prices for pork, more competitive than beef, but less than chicken, and the overall indebtedness of Brazilian consumers. In 2015, pork prices are more competitive than beef for approximately 10 percent, but higher than chicken prices by 7 percent. Packers believe that these conditions will likely prevail in 2016.

An intense marketing campaign in the past years has improved fresh consumption of pork, but pork utilization in Brazil is estimated at 67 percent for industrial/processing and only 33 percent for fresh consumption. Promotional activities in Brazil are trying to address constraints affecting fresh pork consumption, such as a concentration during the winter months (June-August) and regional concentration of pork consumption in the southern regions of the country.

Trade:

Brazilian pork exports are forecast to rebound by two percent in 2016 supported by strong exports to Russia and Hong Kong. These two markets in 2015 account for a market share of Brazilian pork exports of 69 percent and local exporters believe that they will be able to maintain these levels of exports in 2016. They also foresee a rebound in exports to Angola and Singapore next year as the Brazilian product becomes more competitive in these markets. Other promising new markets for Brazilian pork are: South Africa, China, Japan and Chile. A priority in trade negotiations for the coming year is South Korea.

Meat, Swine

2014

2015

2016

Market Begin Year

Jan 2014

Jan 2015

Jan 2016

Brazil

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Slaughter (Reference)

36817

36800

37100

37197

0

37620

Beginning Stocks

0

0

0

0

0

0

Production

3313

3400

3333

3451

0

3510

Total Imports

2

1

2

1

0

1

Total Supply

3315

3401

3335

3452

0

3511

Total Exports

556

556

530

565

0

580

Human Dom. Consumption

2759

2845

2805

2887

0

2931

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

2759

2845

2805

2887

0

2931

Ending Stocks

0

0

0

0

0

0

Total Distribution

3315

3401

3335

3452

0

3511

(1000 HEAD) ,(1000 MT CWE)

Export Trade Matrix

Country

Brazil

Commodity

Meat, Swine

Time Period

Jan-Jun

Units:

Metric Tons

Exports for:

2014

2015

U.S.

0

U.S.

80

Others

Others

Albania

4,310

1,414

Angola

20,084

11,348

Argentina

3,858

4,830

Armenia

2,417

1,862

Azerbaijan

1,220

2,049

China

619

307

Chile

4,163

3,813

European Union

257

125

Georgia

4,582

3,317

Kazakhstan

108

463

Hong Kong

36,954

39,300

Japan

602

1,340

Moldova

2,808

291

Russian Federation

83,557

95,228

Singapore

16,930

13,650

UAE

2,106

2,369

Ukraine

2,798

54

Uruguay

10,018

9,320

Venezuela

0

0

Total for Others

197,391

191,080

Others not Listed

7,759

7,313

Grand Total

205,150

198,473

HTS: 020311,020312,020319,020321,020322,020329,

and 021011,021012,021019,160241,160242,160249

Quantity in Product Weight Equivalent (PWE)

Updated: August 3, 2015