Brazil: A puzzling development

The most puzzling current development in the international meat trade refers to Brazil. Over the last decade, meat production there has increased and large meat processing groups have been created, which have taken advantage of the rising appetite for beef, chicken and pork among the growing Brazilian middle class.

However, the prospect of Brazilian president Dilma Rousseffs impeachment, the worsening economic situation, a large increase in unemployment and potential social unrest make for a sombre outlook for Brazil.

Despite all this, export-focused meat companies such as Brazil Food and JBS, which have a global reach, are doing well. Falling local consumption of pork, chicken and beef, leading to higher export volumes and the plunging real, could unsettle world trade by throwing yet more cheap meat on the market, thus worsening the current glut and further lowering international prices.

International prices for pork, chicken and commodities are languishing at very low levels. A low Malaysian palm oil crop and the bottoming of oil prices have led to some revival of international tallow and fats prices. Is this a sign of spring for commodity prices? Chinese demand for leather, casings, offal and variety meats will also need to revive before we can witness a thaw in the market.

On a positive note, the now competitive European pork exports are booming. Falling domestic supplies of pork in China and growing demand in the Philippines mean more and more pork is leaving Europe; EU pork exports were up 22% in January against the same period of 2015 and offal exports up 30%. Pork exports are providing a necessary floor to prices and alternative outlets to an oversupplied European market. Pork consumption is back up in the European Union to 40.9kg per capita in 2015, but has yet to catch up with the increased production.

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