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Hyberville Neto<\/strong>, director at HN AGRO<\/p><\/div>\n AgriBrasilis – How are the Brazilian beef exports to China behaving?<\/strong><\/p>\n Hyberville Neto – <\/strong>In May, 111 thousand tonnes of fresh beef were exported to China, an increase of 16.5% when compared to the same month of 2022. Compared to April, the increase was of 173.5%. In April, sales to the country were still feeling the effect of the suspension that occurred between the end of February and the end of March, related to the atypical case of Bovine Spongiform Encephalopathy (BSE, or \u201cmad cow disease\u201d).<\/p>\n Regarding prices, there was a monthly increase of 2.8% in the average price of meat sold to China in May, with an average of US$ 5.25 thousand\/t. However, the level is 27.2% below that observed in the same month of 2022, when the quotation was at US$ 7.22 thousand\/tonne.<\/p>\n Another point that can be observed is that, despite lower prices in the annual comparison, both for China and for other customers, the amounts that China has paid more than other customers have increased in recent months. In December and January, the average price of exported meat to China was 0.4% and 2.5% higher than exports to other destinations, respectively. In April and May, this ratio was 11.1% and 9.5%, respectively.<\/p>\n AgriBrasilis – How did the Chinese embargo affect the beef inventory in Brazil?<\/strong><\/p>\n Hyberville Neto – <\/strong>The greater cattle supply in 2023, related to the livestock cycle, added to the weaker flow of exports and increased the supply of meat in the domestic market, devaluing the cattle, the wholesale prices and, more subtly, the prices in retail.<\/p>\n Despite declines for ranchers and wholesalers, the refrigerator’s sales margin, considering the domestic market, is interesting. In the June partial average, the wholesale carcass price was 5.5% higher than the price paid for the live cattle, that is the best ratio since October of 2021.<\/p>\n AgriBrasilis – What caused the 18.5% drop in the price of live cattle in 2023? What are the effects in the short and medium term?<\/strong><\/p>\n Hyberville Neto –<\/strong> The greater supply of cattle for slaughter associated with a moderate domestic demand\/consumption caused this drop. In the 1Q, cattle slaughter increased by 4.8% compared to 2022, driven mainly by the increase in the supply of cows (18.7%) and heifers (15.7%).<\/p>\n In the international market, the USDA’s expectation for the year is another record volume exported by Brazil, but the beginning of 2023 was troubled by the sales suspension to China. As mentioned, sales are accelerating again and, despite lower prices, volumes have been good compared to 2022.<\/p>\n AgriBrasilis – Can the positive projections for beef consumption hold back this price decrease?<\/strong><\/p>\n Hyberville Neto –<\/strong> The USDA expects the total consumption of beef in Brazil to increase by 1.3% in 2023, compared to 2022.<\/p>\n This increase is related to the increased supply of meat (from females), related to the livestock cycle. With a greater supply of meat, if exports do not dispose of all the \u201cadditional\u201d that is available, the trend is for prices to fall, and this stimulates sales on the domestic market, even if the purchasing power of the population is moderate.<\/p>\n AgriBrasilis – How are prices today compared to the last 12 months? What is the relationship between price and consumption in this period?<\/strong><\/p>\n Hyberville Neto –<\/strong> In 12 months, considering the partial of June, live cattle decreased 22.6%, while the wholesale carcass fell 16.7% in nominal values.<\/p>\n Considering the IPCA variations, in the average of the monitored beef cuts, beef decreased 6.0% in the 12 months, considered until May (last available IPCA).<\/p>\n In other words, we had greater declines for live cattle than for wholesale, improving the industry’s sales margin in the domestic market, and we had more relevant declines for wholesale than for retail, where the sales margin also improved.<\/p>\n AgriBrasilis – How do cost fluctuations impact the final price for the consumer? What’s the trend for 2023?<\/strong><\/p>\n Hyberville Neto \u2013<\/strong> Costs influence the economic attractiveness of any activity, that is, they stimulate or discourage production, that can impact future prices. It’s not an automatic transmission and it doesn’t always happen, but that relationship exists.<\/p>\n In poultry, for example, it is common for housing adjustments to occur because of tight or negative margins. This decreases production and contributes to prices later on.<\/p>\n About beef cattle, we have had falling feed costs and low replacement costs for some time. On the one hand, this collaborates with the confinement intention (that would be offered later). However, the drops in sales prices observed in recent months, both in the physical market and in the futures market, affected the projections of results and the farmer’s willingness to confine.<\/p>\n As corn prices dropped well in the recent past, it is possible that this encourages the farmer to confine the cattle, but we do not expect a large supply of confined cattle in the second semester. A shy, or discreet confinement scenario collaborates with prices at some level. We must not forget that 2023 is a year of larger supply, so we do not expect strong price increases, but some appreciation may occur in the second half of the year.<\/p>\n Thinking about the final consumer, the trend is for the market for live cattle to gain strength with the off-season, that should support prices throughout the chain. The slightly better domestic consumption in the second half of the year, especially in the 4Q, should also not require retailers to return much of their margins, that should keep consumer prices sustained, with possible valuations, but modulated by the economy.<\/p>\n
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