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Brazil eagerly awaits surge in Asian demand for pig meat

Brazil’s pig industry is eagerly awaiting the foreseen surge in demand for pig meat from China. Currently, Brazil is not really feeling the effects of the African Swine Fever crisis in Eastern Asia yet. Although prices grew over the first 6 months of 2019 by 70%, in July the prices dropped again by 15.6%.

The main reason for this phenomenon is that prices are still on ‘speculation’ levels and that the demand has not really started increasing. As a result, the generalised expectations of a non-stop increasing margins for Brazilian pig meat and quotes have started to drop.

Prices for pigs dropped again in July

After 6 months of non-stop rising, prices reached R$ 5.44/kg (US$ 1.35) in São Paulo on July 4, which is 70% higher than R$ 3.20/kg (US$ 0.79) exactly 1 year before. Afterwards, they decreased again to R$ 4.59/kg (US$ 1.14), according to the Center for Advanced Studies in Applied Economics (Cepea) from São Paulo University (USP).

Exports to Asia mostly consolidated and only rose slightly this period. Data from the Government Exportation Secretary (Secex) show how Brazil’s exports to China during this year’s first 6 months have been relatively similar to 2018, rising marginally from 89,000 to 92,000 tonnes. Vietnam ordered an additional 5,500 tonnes (from 1,600 to 7,100). For Asia as a whole, however, pork meat shipments from Brazil decreased, , from 197,000 to 186,000 tonnes over the same period.

For Brazil’s pig producing and processing industries, it is believed that better days are ahead. Photo: Daniel Azevedo
For Brazil’s pig producing and processing industries, it is believed that better days are ahead. Photo: Daniel Azevedo

Chinese producers bringing slaughterings forward

According to Alexandre Mendonça de Barros, consultant in Brazil, the reason is that China’s producers have brought their slaughterings forward, currently preventing a shortage in most provinces. He said, “Chinese producers are advancing in order to avoid more losses. But that effect will stop during the next weeks. ASF shall impact the real market as of the 4th quarter in 2019.”

When demands would indeed start rising, Brazil might face another problem. Currently, the country has only 9 pig slaughterhouses eligible to export into China. Nevertheless, Brazil’s agricultural ministry (MAPA), has already sent a list with 30 new plants to China in May, which may be approved when Brazil’s president, Jair Bolsonaro, will visit Asia this month.

Convincing China’s leaders to recognise more plants

Mr Mendonça de Barros added, “It is not that easy, to replace 25% of the world’s pig market that has disappeared overnight. Brazil’s government needs to convince the Chinese leaders to recognise more plants to export. In addition, there are other competitors like Canada and Europe, the internal market and logistics as well. In any case, the Asian ASF crisis has created a new era for international pig trade.”

What is pig production like in Brazil? Read the analysis

While waiting for the final OK to start supplying extra pork to Asia, a 1st record can already be celebrated in 2019. Pork exports amounted 340,800 tonnes in the first 6 months of 2019, which was the best result since 2005 and a 24% increase compared to that same period in 2018 (274,000 tonnes). In total, China bought 27% of the total pork volume Brazil exported, followed by Hong Kong (22%) and Russia (8%).