Pig and poultry producers in Brazil have been buying wheat in the futures market instead of corn in order to avoid higher feeding costs. The reason is the very high price for corn, which forms the main input for animal feed in Brazil.
According to the Brazilian Center for Advanced Studies on Applied Economy (CEPEA), part of the University of São Paulo, corn prices have jumped from US$ 8.90 to US$ 19.06 per bag of 60 kg in 1 year, or 114.1% more, since May 2020.
On the other hand, wheat prices have “just” raised 39.1%, growing from US$ 224.80 to US$ 312.74 per tonne. The grain can totally replace corn as feed for pigs and poultry.
Just like in Brazil, US corn future contracts reached their highest level in nearly 8 years recently. Cold weather in the US also added to the price hike.
As a consequence, Brazil’s leading companies have started to look for alternatives for buying corn from Argentina and Paraguay, anticipating deals on wheat and other options.
Francisco Turra, former Brazilian minister of agriculture and president of the Brazilian Association of Animal Protein (ABPA), said demand from big integrators, providing grains to farmers, is leaving a mark on the increase of wheat areas in Rio Grande do Sul.
In April, he commented, “JBS and BRF have already announced they are going to buy winter crops such as wheat, triticale and barley to use as feed. These companies have already done business for future delivery.”
In line with data from the Federation of Agriculture of the State of Rio Grande do Sul (Farsul), Turra said the area to be planted with wheat and other winter crops in 2021 could grow from 1 million ha to 1.4 million ha.
According to the pig and poultry research agency Embrapa Suínos e Aves, all 9 components that make up pig production costs have increase in the last 12 month in Brazil and the ICPSuíno index grew 44.5% since May 2020.
The largest increase was observed in feed costs, which increased 39.02%, followed by maintenance (1.36%); capital costs (1.14%), health (0.87%), others (0.84%), depreciation (0.69%); workforce (0.48%), transportation (0.09%); and electricity (0.02%).