The increase in production costs for pig farmers is a reality, but the margin obtained from sales at good prices still gives producers time to replenish cash after years of crisis, this is what two presidents of Brazilian cooperatives and associations in the sector say. .
This week, the Pig and Poultry division of the Brazilian Agricultural Research Corporation (Embrapa) released a survey for the month of October which shows that production costs for pig farming rose by 2.17%. Feed spending makes up the majority of expenditure, around 76.49% in October.
Despite this, according to Dilvo Grolli, president of the Cooperativa Agroindustrial de Cascavel (Coopavel), in Paraná, due to Brazil's good performance in pork exports, the position of the protein was completely reversed in relation to the status it occupied last year.
— “In May 2018, the producer sold at R$ 2.50 per kilo, and had a production cost of R$ 3.50. Today, the selling price is on average R$ 5.50, while the cost is around R$ 3.80. This gives us a margin of 45% that allows us to finance the appreciation of corn and soybeans”, he explains.
According to him, “today the cost of feed is more or less 75% relating to soybeans and corn, and if we look at the appreciation of 15% of corn in 2020, we will have feed with a reflection of 7% to 8%, but this fits within this margin of 45% ”.
Valdecir Folador, president of the Rio Grande do Sul Pig Breeders Association (Acsurs), in Rio Grande do Sul agrees. For him, producers who are outside the vertical integration system, whether with companies or cooperatives, end up feeling more variations, but still has achieved good margins on sales.
— “We are seeing that mainly corn has been valued, and we are going to wait for the first harvest here in Rio Grande do Sul, around February, to see how it will turn out. Despite this increase in corn, the prospect of appreciation for pork, and this increase in protein, should continue”, says Folador.
Analyzing the market since the beginning of November, it is possible to see the appreciation of live pigs in the country's main export markets. A kilo of the animal in Paraná is reaching R$ 5.30, an increase of around R$ 0.20 since the beginning of the month, and in Santa Catarina the appreciation was R$ 0.17 in the period, reaching R$ 5.20. In Rio Grande do Sul the increase was R$ 0.15, reaching R$ 5.14 per kilo.
EXPORTS IMPROVE INCOME, BUT CAUTION IS THE KEY
The increase in imports by China due to the African Swine Fever crisis has pushed prices up and represents an outlier in the market. According to Grolli, in the last four years, national pig production was in the range of 3,600 tons throughout Brazil, and the expectation is that 2019 will close at 4 million tons. “Exports that were between 500 and 600 thousand tons, this year the prospect is to jump to 800 thousand tons”, he celebrates.
The moment is good, and should last until around 2024, according to Grolli and Folador. This is the window for China to begin to recover from this crisis, according to Folador, since “to have genetic material (grandparents and breeders to start the breeding stock) to produce a good pig, it takes 12 to 24 months, and more 24 months to rebuild the squad for slaughter.” Furthermore, it highlights the waiting time for environmental decontamination to ensure that the disease does not return.
Therefore, both recommend that producers should take advantage of good sales to pay off debts, build up good cash and, if they choose to grow, do so with the possible recovery in China in mind.
Folador exemplifies the need for caution by citing the pig market situation between Brazil and Russia in the past. “Until 2017 we had the problem of dependence on exports to Russia, which purchased more or less 40% of protein, today Russia represents 7%. There was an embargo for health reasons, which left the pig farmer in the lurch. The input of pork into China today is almost 60% from Brazil alone. We have already seen this film and we cannot remain dependent on this”, he states.
The four-year deadline for China's recovery, according to Grolli, makes large investments in works unfeasible, for example, if the producer decides to increase infrastructure. “If it takes more or less two years between project and construction, there is little time for this investment to start paying off”, he explains.
Source: Notícias Agrícolas
