Markets

Analysts say lower cattle prices will fatten Brazilian meatpackers’ margins.


© Stocksak. FILEPHOTO: The logo for Brazilian meatpacker JBS SA was seen in Jundiai on June 1, 2017. REUTERS/Paulo Whitaker

By Nayara Figueiredo

SAO PAULO, (Stocksak), – While a decrease in Brazilian cattle prices this season and strong demand from Brazil for its beef exports will increase Brazilian meatpackers’ margins in short term, analysts warn that weakness in the domestic markets could limit those gains.

According to Scot Consultoria an agribusiness consultancy, prices are falling on the Sao Paulo markets.

Alcides Turres, director at Scot Consultoria, stated that “the margins for slaughterhouses that export have improved.” He said that companies would have different ways of converting these larger margins into profit.

Brazil is home to some the largest meatpackers in the world, including JBS SA (OTC) Marfrig and Minerva SA

Brazil’s beef prices have been falling due to a greater number of cattle being brought to market and the more aggressive negotiating strategies of foreign buyers, particularly China.

A weaker yuan currency has pushed China, which accounted for almost 53% of Brazilian beef purchases in September, to press for discounts from sellers in the South American nation, Safras & Mercado analyst Fernando Iglesias said.

Brazil exports about 30% of its beef production, while the rest is consumed in Brazil. However, high inflation in Brazil has impacted consumers’ purchasing power and slowed down their ability to purchase beef. This has led to a decrease in domestic beef demand and companies turning to export markets.

According to government data, Brazil’s October beef imports have already exceeded those in the same month in 2021.

Mary Silva, an analyst at BB Investimentos, stated that the record of beef exports from August and September should favor third-quarter results for the listed slaughterhouses. Minerva was likely to be the biggest beneficiary due its export-heavy business.

($1 = 5.2732 reais)

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