Porto Alegre, December 28, 2022 – High pork availability will be the biggest challenge for the sector in 2023. Next year will be challenging for the Brazilian swine industry due to availability, which will continue to expand. The first semester will be more challenging because of several factors, such as:
– Seasonality of demand – Historically, pork consumption falls in the first months of the year due to the lower purchasing power of households due to the payment of taxes and the purchase of school materials. In addition, high summer temperatures impact consumption.
– Production cost – The price of corn must remain at high levels in the first months of the year, considering a difficult logistical framework due to the priority of selling soybeans. Freight must go up. Another point is that the final corn stocks will be short due to the strong exports of the current business year. Soybeans must present a bearish picture due to the record production estimate. The weather is the variable to be monitored to confirm the crop. From the second half of 2023, the price of corn tends to be pressured with the entry of the second crop in the market.
– Price of competing proteins – As previously mentioned, pork is the third option for Brazilians. The prices of chicken cuts may find difficulty in increasing in the first months of 2023, considering that the housing numbers for December and January will be strong, which signals large production and availability, even with the expectation of strong exports. As for beef cuts, their prices have been held back in the wholesale market this December and may find it difficult to get sharp highs next year due to the advance in slaughter. The slaughter of matrices must continue to occur, which must weigh on prices along the chain. Another point to be monitored is the Chinese role in beef imports. China is paying less right now, which means pressure on exporters’ margins. Thus, given the scenario of competing proteins of animal origin, pork cuts need to be affordable to gain preference among consumers.
– Pork production – According to SAFRAS & Mercado, Brazilian pork production must reach 5.218 mln tons in 2023, an increase of 3% compared to the 5.067 mln tons forecast for this year. Despite the severe crisis experienced by the sector since last year, there are no signs of cuts, except for the most fragile independents, who are abandoning the activity. Deteriorated margins and losses may end up affecting the investment intentions of large industries next year.
– Brazilian exports – Brazil must export 1.072 mln tons in 2023, according to SAFRAS, a decline of 1% compared to the 1.083 mln estimated for this year. In the second half of 2022, China expanded its purchases of Brazilian pork, which is positive, otherwise the situation in Brazil would be even more difficult. For the next few months, the rhythm of shipments to this destination tends to fall and with a possible decline in the price per ton. Prices in China are plummeting at the end of the year, a picture that is reflected in the futures set on the Dalian stock exchange, where the spot contract price retreated to levels registered 10 months ago. The market prices an increase in local supply and weakened demand, so the trend is for the Chinese to slow down the pace of imports until their supply dries up, which must take a few months. It does not mean that China will stop buying. Increased production and a possible decline in exports in the coming few months mean greater availability of pork on the market and difficulties with prices and margins. The dynamics of business involving live pigs must prove to be fierce in the first half of 2023.
– Brazilian domestic availability – Given the production and export figures, Brazilian domestic availability must grow 4% in 2023, reaching 4.145 mln tons, against the 3.984 mln forecast for this year.
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