Brazilian Meat and Poultry Update

The dominance of Brazilian agriculture continues to rise. Long the largest soybean producer and exporter globally, they unseated the U.S. as the largest global corn exporter in 2023 (doubling corn exports in 5 years). That was heavily driven by China’s 2023 agreement allowing Brazilian corn imports. Their dominance in meat and poultry continues as well. They remain the largest meat and poultry exporter globally (#1 in beef and chicken).

Brazil’s meat and poultry production continues to post record highs for all species most years and will again in 2024. The combination of abundant feeds and hungry global markets, mainly China, propels Brazilian production forward. China’s increased ties with Brazil are obvious and strategic. Their combined interests transcend agriculture with Chinese investment in Brazilian oil refineries, real estate, railways, and businesses. Brazilian President Lula da Silva vocalized support for a “One China” policy earlier this year under which China claims Taiwan. He also said this year, “Nobody can stop Brazil from continuing to develop its relationship with China,” during his 2023 visit to    Beijing. Former Brazilian President Dilma Rousseff heads the BRICS bank in Shanghai. As China loses their grip on agriculture self-sufficiency they see Brazil as a key partner. Two weeks ago, China approved 38 Brazilian meat and poultry plants for export.

In 2010 just 2% of Brazil’s meat and poultry exports went to China; by 2020 it was 29%. Last year it was 27%. But Brazil is learning the risks of a single dominant export market. China’s decision to lift draconian COVID policies in December 2022 led to a poor economy and weakened meat and poultry demand in 2023. And while Brazil still shipped a record 2.2 million metric tons to China last year, 2023 saw the average exported prices from Brazil to China drop -25% for beef, -1% for poultry and -5% for pork.

Brazilian Cow Herd Liquidation?

This chart shows Brazilian cattle prices down -35% since the peak in March 2022. There are two key reasons for this decline. First, strong Chinese demand has since fallen on heavy export volumes and weakened domestic demand. Also, Brazil’s cattle cycle has moved into liquidation on declining prices which further depresses the market price of cattle as slaughter rates rise. Brazilian cattle slaughter surged 14% in 2023, rising 20% in Q4. Matto Grosso (the largest cattle state in Brazil) saw female cattle slaughter rise 56% in January versus a year ago. USDA forecasts the Brazilian herd down -0.3% in 2024, but based on slaughter data and other sources in Brazil we see a larger herd decline ahead.

This Brazilian herd decline, combined with declines in the U.S., Australia, Canada, Argentina, and Uruguay takes the 6-nation beef herd to 123 million head in 2024, the lowest level since 2016 and down -3% from the 2018 peak.

Brazil’s Meat and Poultry Future

We expect to see continued growth in Brazilian pork and poultry based on abundant feed supplies and export growth. Overseas demand should remain solid, and Brazil continues to improve their market access. Tightened global beef supplies should spur prices higher into 2025 for Brazil and elsewhere. China remains a key partner with a rising co-dependence.

Brett Stuart