A more difficult economic environment is expected slow growth in the poultry sector. Post forecasts broiler production to increase by 2.5 percent in 2015 to 13 million metric tons. This increase in production reflects industry optimism mostly with higher exports compared to last year, due to the depreciation of the Brazilian currency. However, domestic demand for broiler is likely to increase slightly due to the expected recession of the Brazilian economy this year. No changes in the outlook for turkey.

Executive Summary:

Post revised the previous forecast for broiler production to increase by 2.5 percent in 2015. This increase will mostly be driven by higher exports stimulated by the depreciation of the Brazilian currency. The Brazilian currency was depreciated by 28 percent since August 2014. Domestic demand is forecast to increase at a moderate rate because of the sluggish economic outlook in Brazil, expected to head towards a recession. Producer margins are expected to be positive for the second consecutive year, but at a declining rate, as cost of production continues to increase. The outlook for turkey production and exports is also for moderate growth next year.

Poultry, Meat, Broiler

Production:

Broiler production is forecast to grow by 2.5 percent in 2015. Post revised down its previous estimate of a 5 percent increase in production as a result of the new economic challenges in Brazil. FAS/Brasilia believes that a production estimate around 13 million metric tons (MT) in 2015 reflects better the current expectations of Brazilian producers for this year. Despite the 28 percent devaluation of the Brazilian currency since August 2014, which should boost broiler exports, there are major uncertainties with Brazil's economic outlook that could affect broiler production. These constraints include: unpopular government cuts and tax hikes, rising inflation, rising unemployment, power shortages and higher energy costs, and a possibility of energy rationing. In view of this adverse outlook for the economy, broiler producers plan to continue with the strategy to adjust supply and demand for broilers, in order to maintain their profit margins.

Post also revised the production estimate for 2014 to reflect final numbers obtained from the industry. Refer to Production, Supply e Distribution (PSD) table for updated estimates.

Production Costs

In 2014, it is estimated that the cost of broiler production increased a total of 6.2 percent. The increase is mostly attributed to the hike in prices of day old chicks, which increased by nearly 6 percent, despite the decrease of animal feed costs. The increase of nearly 2 percent in the price of live broilers, allowed producers to maintain their profit margins in 2014, although at a declining rate as compared to the previous year.

The outlook for positive profit margins in 2015 remains the same, assuming the current outlook for higher availability of soybeans and corn and reasonable increase in energy costs.

Consumption:

Post also revised downwards its domestic consumption forecast in 2015 to 9.35 million MT. Although broiler prices remain competitive with other sources of animal protein, consumption is expected to increase at a slower pace due to the sluggish economic outlook and continued high level of indebtedness of Brazilian consumers.

Trade:

Overall Brazilian broiler exports are expected to grow at a rate of 3 to 4 percent in 2015, to nearly 3.7 million metric tons (MT), mostly driven by the devaluation of the Brazilian currency. The Brazilian currency was devaluated by 28 percent since August 2014 and allows Brazilian exporters to maintain or expand their exports to the five traditional and most important markets, such as Saudi Arabia, Japan, Hong Kong, United Arab Emirates and the European Union. However, two markets – China and Russia - are key for the expansion of Brazilian broilers in 2015.

China. Local exporters expect higher sales of broilers to China, mostly due to the Chinese embargo on U.S. poultry. Although exporters view a window of opportunities valued at US$ 200 million in new exports to China, they remain cautious because of the reduced number of Brazilian plants approved to export to China, although the approval of five new plants allowed Brazilian exporters to increase their exports to China in January 2015 by 16 percent, as compared to the same month in 2014. A high level visit of a Brazilian team chaired by the Minister of Agriculture is expected to arrive in China late in March to negotiate a new agreement that would allow the increase in broiler plants, as well for beef. In 2014, China was the sixth largest destination for Brazilian broiler meat.

Russia. Brazilian broilers exports to Russia has been growing rapidly since September of last year, after the approval of new Brazilian plants in August of 2014. Total exports to Russia reached 125,000 metric tons (MT), up 64 percent. According to recent data released by the trade, broiler shipments in January 2015 continued to expand rapidly at 80 percent, as compared to the month in 2014. However, these shipments in January 2015 were below the volume of broiler exports in December of 2014 which brings concerns to the Brazilian exporters. Post believes in a moderate increase in broiler exports to Russia during 2015, because Brazilian exporters are cautious about further increases in broiler exports to Russia in 2015 (as well as Venezuela and Angola), due to the uncertainties derived from the international drop in oil prices and, in the case of Russia, the possibility of the lift in the ban of poultry imports from the European Union and the United States.

Other markets. Venezuela and Angola, two countries dependent on oil exports are also of concern to the Brazilian broiler exporters: Venezuela (payment defaults) and Angola (recent ban on food imports). Broiler exporters with the support of the Brazilian government decided to open a panel in the World Trade Organization (WTO) against Indonesia, which is resisting in opening their market for Brazilian broilers. Recently, South Africa and Pakistan were open for Brazilian exports.

Poultry, Meat, Broiler

2013

2014

2015

Market Begin Year

Jan 2013

Jan 2014

Jan 2015

Brazil

USDA Official

New post

USDA Official

New post

USDA Official

New post

Inventory (Reference)

53

53

55

54

58

55

Slaughter (Reference)

6,400

6,147

6,525

6,232

6,725

6,295

Beginning Stocks

0

0

0

0

0

0

Production

12,308

12,308

12,680

12,692

13,115

13,013

Total Imports

3

3

3

3

3

3

Total Supply

12,311

12,311

12,683

12,695

13,118

13,016

Total Exports

3,482

3,482

3,600

3,558

3,825

3,665

Human Consumption

8,829

8,829

9,083

9,137

9,293

9,351

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

8,829

8,829

9,083

9,137

9,293

9,351

Total Use

12,311

12,311

12,683

12,695

13,118

13,016

Ending Stocks

0

0

0

0

0

0

Total Distribution

12,311

12,311

12,683

12,695

13,118

13,016

MIL HEAD, 1000 MT, PERCENT, PEOPLE, KG

Export Trade Matrix

Country

Brazil

Commodity

Poultry, Meat, Broiler

Time Period

Jan-Dec

Units:

Metric Tons

Exports for:

2013

2014

U.S.

0

U.S.

0

Others

Others

Angola

85,222

102,962

China

190,322

227,548

Cuba

36,676

37,735

Egypt

87,385

79,694

European Union

245,486

226,103

Hong Kong

335,668

315,553

Ghana

33,313

23,337

Iran

12,746

5,271

Iraq

75,694

61,300

Japan

389,697

413,879

Jordan

58,985

50,217

Kuwait

113,624

101,467

Oman

61,998

64,124

Phillippines

19,677

36,543

Qatar

60,280

63,342

Russia

47,292

124,939

Saudi Arabia

688,884

647,718

Singapore

79,192

81,149

South Africa

168,899

156,427

South Korea

53,285

51,849

UAE

244,963

257,020

Yemen

85,292

74,519

Venezuela

162,563

202,600

Total for Others

3,337,143

3,405,296

Others not Listed

376,156

401,138

Grand Total

3,713,299

3,806,434

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

and 1602.32

Quantity in Product Weight Equivalent (PWE)

Updated February 6, 2015

Poultry, Meat, Turkey

Production:

The outlook for 2015 is for moderate growth in turkey production due to the same economic conditions affecting broilers in general. Post revised downward at 480,00 MT turkey production estimate in 2014, mostly driven by a slowdown in the growth of domestic demand due to higher turkey prices and competition from alternative broiler products that meet the preference of consumers during major holidays, such as Christmas. The drop in production of turkeys also reflects the major decline in turkey exports.

Exports:

Turkey exports are estimated to increase by 4,000 MT to a total of 130,000 MT in 2015. The moderate increase in exports is mostly driven by the depreciation of the Brazilian currency. Brazilian turkey exporters continue to face difficulties of market access in the European market. In 2014, turkey exports to the European Union declined significantly by 22 percent. However, the outlok for 2015 calls for increase in exports to other markets such as, Angola, South Africa, Peru, and Chile, among other markets in the Middle East.

Poultry, Meat, Turkey

2013

2014

2015

Market Begin Year

Jan 2013

Jan 2014

Jan 2015

Brazil

USDA Official

New post

USDA Official

New post

USDA Official

New post

Inventory (Reference)

0

0

0

0

0

0

Slaughter (Reference)

48

48

47

47

0

47

Beginning Stocks

0

0

0

0

0

0

Production

520

520

470

470

0

480

Total Imports

0

0

0

0

0

0

Total Supply

520

520

470

470

0

480

Total Exports

161

161

120

126

0

130

Human Consumption

359

359

350

344

0

350

Other Use, Losses

0

0

0

0

0

0

Total Dom. Consumption

359

359

350

344

0

350

Total Use

520

520

470

470

0

480

Ending Stocks

0

0

0

0

0

0

Total Distribution

520

520

470

470

0

480

MIL HEAD, 1000 MT, PERCENT, PEOPLE, KG

Export Trade Matrix

Country

Brazil

Commodity

Poultry, Meat, Turkey

Time Period

Jan-Dec

Units:

Metric Tons

Exports for:

2013

2014

U.S.

0

U.S.

0

Others

Others

Angola

15,041

14,022

Argentina

1,001

892

Benin

15,654

14,006

Chile

4,069

2,864

Congo

4,772

4,206

Congo, D.R.

1,209

466

Gabon

951

500

Guinea, E.

2,444

3,428

European Union

76,156

51,755

Hong Kong

573

318

Peru

4,124

6,428

Russia

5,878

2,759

Saudi Arabia

1,693

1,989

South Africa

19,289

13,264

Switzerland

2,718

2,788

Total for Others

155,572

119,685

Others not Listed

5,386

5,925

Grand Total

160,958

125,610

Note: It includes HTS Codes: 02072400; 02072500; 02072600;

02072700; 16023100. Quantity in Product Weight Equivalent (PWE)

Updated Feb 6, 2015