Porto Alegre, November 6, 2020 – The factors present in the market point to the continuation of the upward trend in the price of live hogs and the cuts in wholesale prices in the short term. The supply of pigs remains tight in the face of demand from slaughterhouses in much of the country. Moreover, the animals are mostly light, according to reports, a variable that regulates the availability of meat in the domestic market. The high cost of production helps explain the weight of pigs, causing breeders to retain animals for less time on farms.
Slaughterhouses may try a different approach in the negotiations in the coming weeks, that is, try to hold back new aggressive movements in prices due to the claim that the transfer to final consumers tends to be increasingly difficult, given the adverse economic scenario. However, this strategy is unlikely to hold back adjustments if the domestic supply picture continues to shrink. Besides the weight of pigs, the availability of Brazilian pork is strongly affected by the high flow of exports, driven by purchases from China. In October, Brazilian exports may exceed 95 thousand tons, considering the preliminary daily average of 4.179 thousand tons shipped by SECEX last week, plus the volume of processed products. According to SAFRAS & Mercado’s estimate, Brazilian exports in 2020 are expected to reach 1.022 million tons, up 42.3% from 718.8 thousand tons registered in 2019.
Another important point and in great prominence is the movement of the prices of corn and soymeal. It is worth noting that the cost of animal nutrition has led farmers to seek readjustments for livestock, aiming at maintaining their margins, but it is not the determining factor for the swine price movement. As previously mentioned, pork shipments play a major role in the supply and formation of prices in Brazil at the moment. In a hypothetical scenario of an abrupt decline in exports, costs would not be capable of supporting pig prices in the domestic market, but the strategy of cutting production, in case domestic demand is unable to absorb the additional volumes available.