Report Highlights:

Post forecasts broiler production to increase by 5 percent in 2016 to nearly 13.5 million metric tons as a result of stable feed costs and higher exports due to the depreciation of the Brazilian currency and the new market opportunities. The slow growth path in domestic demand is due to the current economic recession in the country and reduced purchasing power of consumer due to the high level of indebtedness of Brazilians and rising higher inflation rates. However, due high beef prices in the domestic market, broilers remain the affordable animal protein in Brazil.

Executive Summary:

Post forecasts broiler production to increase by 5 percent in 2016. This increase will likely be driven by higher exports stimulated by the depreciation of the Brazilian currency, stable feed costs due to record soybean and corn crops estimated for 2015/16 crop year, and higher world demand for the Brazilian product, especially after the impact of the Avian Influenza in several countries. Post also notes as a main constraint a critical economic situation in Brazil with rising inflation and unemployment, and lower consumer purchasing power affecting consumption of animal proteins. However, trade sources believe that consumption of broilers will like benefit from this poor outlook of the economy because of the high price of beef in the domestic market.

Poultry, Meat, Broiler

Production:

Broiler production is forecast to grow by 5 percent in 2016. FAS Brasilia believes that a production level at nearly 13.5 million metric tons in 2016 reflects the current expectations of producers to continue with a strategy to adjust supply and demand for boilers and to respond to higher world demand for the Brazilian product, especially because of the impact of the Avian Influenza in several countries. In addition, a devaluation of the Brazilian currency of nearly 30% this year combined with a decline in feed costs makes the Brazilian product highly competitive in the world market. The main constraint affecting next year's forecast is the current economic recession of the Brazilian economy. However, because of higher beef prices, broilers remain the most affordable animal protein in the country as consumer purchasing power is affected by rising inflation and high level of indebtedness of Brazilian consumers in general.

Review of 2015: Post adjusted upward production and export of broilers due to the availability of new data.

Production Costs:

The average cost of broiler production in 2016 is forecast to decline by 3 to 4 percent due to higher availability of feed at stable prices. Items pressuring production costs in 2015 are electricity, labor and transportation, while costs of nutrition and day-old-chicks are declining. These costs of production are for Parana state, the largest broiler producer in Brazil. Production:

Broiler production is forecast to grow by 5 percent in 2016. FAS Brasilia believes that a production level at nearly 13.5 million metric tons in 2016 reflects the current expectations of producers to continue with a strategy to adjust supply and demand for boilers and to respond to higher world demand for the Brazilian product, especially because of the impact of the Avian Influenza in several countries. In addition, a devaluation of the Brazilian currency of nearly 30% this year combined with a decline in feed costs makes the Brazilian product highly competitive in the world market. The main constraint affecting next year's forecast is the current economic recession of the Brazilian economy. However, because of higher beef prices, broilers remain the most affordable animal protein in the country as consumer purchasing power is affected by rising inflation and high level of indebtedness of Brazilian consumers in general.

Review of 2015: Post adjusted upward production and export of broilers due to the availability of new data.

Production Costs:

The average cost of broiler production in 2016 is forecast to decline by 3 to 4 percent due to higher availability of feed at stable prices. Items pressuring production costs in 2015 are electricity, labor and transportation, while costs of nutrition and day-old-chicks are declining. These costs of production are for Parana state, the largest broiler producer in Brazil.

Consumption:

Domestic consumption of broiler meat in 2016 is projected to increase by 2 percent despite the currently economic recession in Brazil. The reason for this is that consumers are shifting from beef to broilers due the high beef prices. However, other major constraints remain such as rising inflation and high indebtedness of Brazilian consumers, which slows down an further increase in domestic consumption.

Trade:

Post forecasts broiler exports in 2016 to expand by 5 percent over this year´s record. The growth in exports will likely be driven by continued devaluation of the Brazilian currency combined with the continued impact of the Avian Influenza in several world markets, which is benefiting Brazilian exporters. In addition, the Brazilian government has recently opened new markets for Brazilian broilers, such as Pakistan, Malaysia, Myanmar, and Mexico (re-authorization for exports until 2016). Brazil is now able to exports broilers to 158 countries, but 70 percent of all poultry exports are concentrated in 10 countries. Other market access work is being conducted in several countries, of which Indonesia is one of the most important, despite the WTO case against that country. Key countries to Brazil´s expansion in broiler exports next year are:

China: Brazilian broiler exports to China are increasing rapidly this year as a result of the Avian Influenza in the United States, but also because of the increasing number of plants approved to that market. Currently 29 plants are approved for China, but by the end of the year this number may increase to 40 plants. Brazilian chicken feet are highly competitive in the Chinese market as the Brazilian currency devaluates further. Brazilian traders expect China to become the second largest destination for Brazilian broilers by the end of next year surpassing Japan, one of the most traditional importers of chicken parts from Brazil, but behind Saudi Arabia, the largest Brazilian market for broilers. As China increases imports from Brazil, Hong Kong declines to the 5th market destination. Brazilian exporters see the decline in broiler exports to Hong Kong as a "readjustment of trade flux" in view of direct sales to China.

Mexico, Chile and Cuba: Brazilian exporters are optimistic about these three markets, mostly Mexico which offers a potential over 200,000 metric tons in view of the Avian Influenza outbreak in the United States. The Brazilian government is negotiating the increase in the number of poultry plants to Mexico which is expected by the end of the year.

Pakistan, Malaysia and Myanmar: Three new markets for Brazilian broilers with a potential for more than 50,000 metric tons, according to Brazilian exporters.

South Korea and South Africa are now among the top 10 market destination for Brazilian broilers and local traders expect higher exports to these countries, mostly to South Africa.

Russia. Although exports to Russia are up this year, Brazilian broiler exporters are not so optimistic about next year´s exports to Russia due to the lower oil prices and the economic situation in that country.

Venezuela is the most negative factor of Brazilian exports this year and likely will continue next year. Lower oil prices combined with a political and economic crisis have affected the country ability to pay for their imports.

Review of 2015: Post increased exports of broilers in 2015 upwards by 5 percent (using USDA methodology, otherwise, total exports of broiler and products may be over 11 percent). Significant increase in exports this year is mostly attributed to two factors: devaluation of the Brazilian currency (30 percent only in 2015) and the impact of the Avian Influenza, mostly in the United States export markets.

Note: The S&D table excludes chicken feet and paws exports to China and Hong Kong, as per USDA pawns methodology

Poultry, Meat, Broiler

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

Inventory (Reference)

54

0

55

55

0

55

Slaughter (Reference)

6232

0

6295

6295

0

6370

Beginning Stocks

0

0

0

0

0

0

Production

12692

0

13013

13080

0

13480

Total Imports

3

0

3

3

0

2

Total Supply

12695

0

13016

13083

0

13482

Total Exports

3558

0

3665

3740

0

3930

Human Consumption

9137

0

9351

9343

0

9552

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

9137

0

9351

9343

0

9552

Total Use

12695

0

13016

13083

0

13482

Ending Stocks

0

0

0

0

0

0

Total Distribution

12695

0

13016

13083

0

13482

(MIL HEAD) ,(1000 MT)

Export Trade Matrix

Country

Brazil

Commodity

Poultry, Meat, Broiler

Time Period

Jan-Jun

Units:

Metric Tons

Exports for:

2014

2015

U.S.

0

0

Angola

40,729

22,754

China

106,229

146,628

Cuba

14,151

33,186

Egypt

46,114

38,592

European Union

114,725

105,978

Hong Kong

156,194

119,850

Ghana

8,907

8,125

Iran

5,218

423

Iraq

28,266

17,345

Japan

194,218

186,952

Jordan

23,413

22,290

Kuwait

50,644

59,854

Oman

32,110

32,844

Phillippines

16,173

14,956

Qatar

31,094

39,876

Russia

23,024

38,150

Saudi Arabia

318,889

359,781

Singapore

37,467

38,049

South Africa

74,593

111,908

South Korea

29,760

58,854

UAE

124,405

144,381

Yemen

37,603

19,948

Venezuela

116,861

43,123

Total for Others

1,630,787

1,663,847

Others not Listed

187,111

207,972

Grand Total

1,817,898

1,871,819

Note: Includes HTS Codes: 0207.11; 0207.12; 0207.13; 0207.14; and 1602.32

Quantity in Product Weight Equivalent (PWE)

Updated: August 3, 2015