Animal Numbers, Cattle

Production:

Post forecasts a continued outlook of limited cattle supplies for slaughter in 2015. The reason for this is the insufficient volume of rains for nearly two years that is affecting the most important cattle producing regions. Since most cattle in Brazil is grass-raised (feedlots account for only 4 percent of production), the droughts in the last two years has had a major impact. According to some analysts, dry weather has also affected the pregnancy rate and the development of calves. These factors combined with an outlook for higher beef exports are likely to contribute to maintain cattle prices at high levels in 2015, despite the negative economic outlook for Brazil.

Trade:

Although the depreciation of the Brazilian currency can support a recovery in cattle exports, which dropped by six percent last year, Post forecasts a drop in cattle exports in 2015 due to short supplies of slaughter cattle and default risks, mostly on exports of cattle to Venezuela.

Production, Supply and Demand Data Statistics:

Animal Numbers, Cattle

2013/2014

2014/2015

2015/2016

Market Begin Year

Jan 2013

Jan 2014

Jan 2015

Brazil

USDA Official

New post

USDA Official

New post

USDA Official

New post

Total Cattle Beg. Stks

203,273

203,273

207,960

207,959

212,700

213,035

Dairy Cows Beg. Stocks

38,259

38,259

38,854

38,600

39,435

38,980

Beef Cows Beg. Stocks

52,986

52,986

54,615

53,660

55,000

54,210

Production (Calf Crop)

50,185

50,185

50,940

49,600

51,705

49,900

Total Imports

0

0

17

10

5

10

Total Supply

253,458

253,458

258,917

257,569

264,410

262,945

Total Exports

689

689

760

649

820

610

Cow Slaughter

11,490

11,490

11,840

10,585

12,112

10,700

Calf Slaughter

300

300

300

350

300

300

Other Slaughter

29,800

29,800

30,115

29,450

30,658

29,600

Total Slaughter

41,590

41,590

42,255

40,385

43,070

40,600

Loss

3,219

3,220

3,202

3,500

2,970

3,300

Ending Inventories

207,960

207,959

212,700

213,035

217,550

218,435

Total Distribution

253,458

253,458

258,917

257,569

264,410

262,945

1000 HEAD, PERCENT

Meat, Beef and Veal

Production:

Post revised beef production to increase only by half a percent in 2015 to 9.8 million metric tons (MT/CWE). The marginal increase in production is only supported by higher exports since domestic demand is expected to remain stagnant. Limited supplies of cattle for slaughter and high cattle prices will also reduce packer's profit margins in 2015, which will likely close some inefficient plants in certain areas of the country. Two important constraints can also adversely impact beef production in 2015: power shortages and higher energy costs, including a possibility of energy rationing.

Consumption:

Post projects domestic beef consumption to remain stagnant in 2015, at 7.9 million metric tons (MT/CWE), in view of the expected higher consumer prices for beef. In addition, a more difficult economic environment, including unpopular government cuts and tax hikes, rising inflation, rising unemployment, higher energy costs, and escalating indebtedness of Brazilian consumers is affecting consumer's confidence. Consumer confidence in Brazil plunged in January 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.

Trade:

Beef exports are expected to grow at a rate of 5 percent to 2 million metric tons (CWE) in 2015, mostly driven by the devaluation of the Brazilian currency. The Brazilian currency was devaluated by 31.3 percent since August 2014. Brazilian exporters also expect another record in the value of beef exports in 2015 at US$ 8 billion, up 11 percent from 2014.

The increase in beef exports is supported mostly by higher demand from Asia, mostly from Hong Kong and China. The Brazilian government announced the suspension of the embargo of Brazilian beef to China several months ago, but shipments have not been resumed yet due to the lack of a sanitary protocol. However, negotiations are well advanced and a high level visit of a Brazilian team chaired by the Minister of Agriculture is expected to arrive in China late in March or early April to conclude the agreement. It was reported that China will also authorize an increase in the number of Brazilian beef plants authorized to export.

The Russian Federation will likely remain as the largest market for Brazilian beef in 2015, which accounted for nearly one third of all beef exports in 2014. According to local trade sources, the Russian Federation has approved more than 100 Brazilian establishments to export beef and beef products to Russia, including variety beef. However, Brazilian exporters are more cautious about the Russian market in 2015 due the economic crisis in that country.

Recently, South Africa and Iraq resumed imports of beef from Brazil. Malaysia and Singapore are also working with the Brazilian government to increase the number of plants eligible 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 also priorities for this year. Other negotiations to open market access for Brazilian beef are concentrated in Thailand, Myanmar, Taiwan and Indonesia.

Production, Supply and Demand Data Statistics:

Meat, Beef and Veal

2013/2014

2014/2015

2015/2016

Market Begin Year

Jan 2013

Jan 2014

Jan 2015

Brazil

USDA Official

New post

USDA Official

New post

USDA Official

New post

Slaughter (Reference)

41,590

41,590

42,255

40,385

43,070

40,600

Beginning Stocks

0

0

0

0

0

0

Production

9,675

9,675

9,920

9,723

10,215

9,820

Total Imports

59

59

65

82

75

90

Total Supply

9,734

9,734

9,985

9,805

10,290

9,910

Total Exports

1,849

1,849

2,030

1,909

2,235

2,005

Human Dom. Consumption

7,885

7,885

7,955

7,896

8,055

7,905

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

7,885

7,885

7,955

7,896

8,055

7,905

Ending Stocks

0

0

0

0

0

0

Total Distribution

9,734

9,734

9,985

9,805

10,290

9,910

1000 HEAD, 1000 MT CWE, PERCENT, PEOPLE, KG