African Swine Fever (ASF) is expected to lead to an increase of 5.6% in global animal protein prices (beef, pork and chicken) by 2020, according to a report from the BTG bank, if China's production falls by 16 million tons , as currently expected. In a more severe scenario, in which the Chinese squad falls by half, the model projects an increase of 8.7% in prices. If the drop in pig supply is 15%, the increase in prices would be 2.7%.
In a detailed report on the Brazilian animal protein sector, signed by Thiago Duarte and Henrique Brustolin, the bank estimates that the increase could go directly to the cash flow of meat companies, especially those with integrated production.
BTG also projected the effect of the estimated price change on protein companies. JBS's forecast for Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) in 2020 increased by 45%, to R$ 22.1 billion, and the expectation is that high prices caused by swine fever will represent R$ 6.2 billion; for BRF, the EBITDA estimate for next year rises by 13%, to R$ 5.3 billion, of which R$ 1.9 billion would come from swine fever; for Marfrig, the Ebitda projection increases by 43%, to R$ 4.6 billion, with African swine fever responsible for R$ 880 million.
The bank maintained JBS as the sector's main purchase recommendation; BRF continues with a neutral recommendation; and the recommendation for Marfrig fell to neutral after results considered poor in the first quarter. The projection did not incorporate the effects of the possible merger between BRF and Marfrig, highlighting that, although the trend is for agreement, the deal may end up not happening. Furthermore, the bank reiterated that it views the possible negotiation with skepticism.
“We chose to wait until we have more details about the synergy potential”, informs the bulletin.
According to the report, it is possible that China is not yet reporting all cases of the plague to try to “prevent negative implications in the political and economic areas”.
The consensus estimate is that Chinese pork supply will fall by 30%, but more alarming analysts are even talking about 50%.
The expectation is that the demand and prices for beef will also benefit as much as chicken in the process of protein replacement by the Chinese.
Post: Marina Carvejani
Author: Industrial Pig Farming
Source: agrolink
