Brazil’s Pork Production Outlook in 2024 Amid Anticipated Increase in Production Cost and the El Niño Weather

According to the latest United States Department of Agriculture (USDA) data, Brazil's pork production is projected to reach 4.64 million metric tons (mmt) in 2024. This marks a 4.27% increase compared to 2023 but a slight downward adjustment of 0.85% from the previous forecast of 4.68 mmt. The anticipated year-on-year (YoY) production growth is driven by an expected growth in sow inventories, which are projected to reach approximately 3.18 million heads in 2024, a 5% YoY rise. This positive outlook is attributed to increased investment in the pig industry in 2023, resulting from reduced production costs.

Notably, the cost of pig production in Brazil saw a significant decline in 2023 compared to previous years, encouraging producers to invest more. According to data from the Poultry and Swine Intelligence Center (CIAS), the production cost per kilogram (kg) of live pig in Brazil dropped substantially in 2023. For example, the cost of producing a kg of live pig in Paraná decreased from USD 1.33 (BRL 6.93) in Jan-23 to USD 1.13 (BRL 5.75) in Dec-23, with the lowest costs recorded at USD 1.07 (BRL 5.57) in Jun-23 and Sep-23. This trend was also observed in other Brazilian states like Santa Catarina, and Rio Grande do Sul.

Figure 1: Pig Production Cost Trend in Selected Brazilian States

However, the downward adjustment in the pork production forecast is attributed to concerns about feed availability and prices in 2024 due to weather challenges. The USDA reports that, despite initially optimistic projections for the 2023/24 harvest, El Niño weather has negatively impacted corn and wheat crops, which are critical components of animal feeds. Consequently, animal feed availability in Brazil is expected to be compromised in the near future, potentially driving prices up.

CIAS data indicates that the cost of producing pigs in Apr-24 increased slightly, with the pig production index (ICPSuino) rising from 321.12 points in Mar-24 to 321.85 points. For instance, in Santa Catarina, the production cost/kg of live pigs reached USD 1.08 (BRL 5.63), a 0.2% increase compared to Mar-24, attributed to rising feed costs and interest on working and investment capital. However, over the last twelve months, there has been a 12.3% drop in production costs.

The ongoing El Niño weather in Brazil has also caused severe flooding, particularly affecting the pig industry in Rio Grande do Sul. On May 20, 2024, the Rio Pig Breeders Association (ACSURS) reported the loss of approximately 12.6 thousand pigs due to floods, affecting around 30 farms. The Center for Advanced Studies on Applied Economics (CEPEA) noted that the floods have also disrupted the transportation of live pigs to slaughterhouses, pork meat to markets, and farm inputs to production sites. Notably, bridges and roads connecting key producing areas such as Vale do Taquari, Serra Gaúcha, and Santa Maria were destroyed. It is worth noting that Rio Grande do Sul accounts for 24.24% of Brazil's overall pork exports, according to the Brazilian Animal Protein Association (ABPA).

Figure 2: Severity of Floods in Rio Grande do Sul

In response to the heavy flooding in Rio Grande do Sul, Brazilian meatpackers have united to tackle the severe operational disruptions. They are working together to address logistical challenges by sharing animal feed and trucks to ensure supplies reach affected pig farms. Despite these efforts, experts warn that a complete recovery of operations will take time. The industry will require comprehensive support and strategic planning to mitigate the long-term impact of the floods.

In conclusion, Brazil’s pork production is expected to increase in 2024 compared to 2023, although the projection falls short of initial expectations. As a result of anticipated supply constraints, producers will likely prioritize international markets due to high global pork demand. Consequently, pork prices in the domestic market are anticipated to rise in the near future, driven by supply constraints, heightened global demand, and expected increases in production costs.