Brazil's Poultry Industry Resilience: Overcoming Challenges and Seizing Opportunities

According to the latest data from the Ministry of Development, Industry, Trade, and Services, Brazil's chicken meat exports amounted to 453 thousand metric tons (mt) valued at USD 817.03 million in Apr-24, an 11.06% increase in volume and a 5.97% rise in value compared to Apr-23. This volume represents the second-highest shipment on record, just behind the 483.89 thousand mt registered in Mar-23. The price per ton averaged USD 1,803.6 in Apr-24, a 4% month-on-month (MoM) increase.

Despite the upward trend since the beginning of the year, the price per ton in 2024 remains below the levels recorded in 2022 and 2023, suggesting a tendency to align with the five-year average trend. It is worth noting that 2022 was considered an abnormal year due to record-high export prices resulting from global supply chain disruptions, such as COVID-19 and the Russia-Ukraine conflict, while 2023 and 2024 are considered recovery years.

Figure 1: Brazil’s Chicken Export Prices from 2022 to 2024

The Brazilian Animal Protein Association (ABPA) reveals that Brazil’s chicken exports in Apr-24 were predominantly destined for China, totaling 57.7 thousand mt, a 22.9% year-on-year (YoY) decline. Japan was second with 42.2 thousand mt (+5.9% YoY), followed by the United Arab Emirates (UAE) with 41 thousand mt (+31.9% YoY), Saudi Arabia with 37.2 thousand mt (+59% YoY), and the Philippines with 29.4 thousand mt (+35.7% YoY). Although there was a decrease in chicken exports to China, the decline was more than offset by shipments to Middle Eastern countries, which are currently experiencing robust demand amidst regional uncertainty.

Brazil’s Robust Export Drivers in 2024

Despite experiencing a 2.74% decline in the first four months of 2024 compared to the same period in 2023, with shipments totaling 1.59 million metric tons (mmt), Brazil's 2024 chicken export prospects remain optimistic. The United States Department of Agriculture (USDA) anticipates Brazil's chicken exports to reach 4.98 mmt in 2024, a 4.4% YoY increase. This positive outlook is attributed to an expected uptick in production, with the USDA forecasting Brazilian chicken output to reach 15.1 mmt in 2024, a 1.34% increase over the 2023 level, driven by reduced production costs.

The Poultry and Swine Intelligence Center (CIAS) data reveals that the production cost per kilogram (kg) of live broilers in Paraná, Brazil, averaged USD 0.83 (BRL 4.28) in Apr-24, relatively stable compared to Mar-24 but a significant 25.89% drop from the record high of USD 1.12/kg (BRL 5.77) in Mar-22. This suggests that profit margins have moderately improved, incentivizing producers to further invest in the poultry industry.

Figure 2: Brazil’s Chicken Meat Production and Exports from 2020 to 2024

Another significant driver expected to bolster Brazil's chicken exports in 2024 is the robust global demand, particularly underpinned by China's recent decision to lift anti-dumping measures against Brazil. The Chinese government lifted the imposed tariffs on February 27, 2024, and this is expected to invigorate exports. The tariffs had been active since 2019, and ranged from 17.8% to 34.2% depending on the exporting company. This move will render the Chinese chicken market more competitive as all Brazilian companies are treated equally.

Additionally, Brazil's proactive strategy of expanding its market base and diversifying its product offerings contributes to export growth. Notably, Brazil has secured pre-listing status for exports to several countries, including the United Kingdom (UK) in Jul-23, Singapore in Dec-23, and Cuba and Chile earlier in 2024. Brazil also succeeded in opening new markets in Israel and Vanuatu in Aug-23, while Russia and Belarus approved new import quotas of 140 thousand mt and 10.9 thousand mt, respectively, for further processing. Moreover, Brazil continues to prioritize exports to halal markets, such as the UAE and Saudi Arabia, which have long been firm partners.

It is noteworthy that Brazil, with its avian influenza-free status in commercial poultry plants, has capitalized on competitors' production challenges due to diseases. This circumstance has allowed Brazil to penetrate new markets and strengthen its presence in existing destinations by expanding its market share.

Brazil’s Approach to Combat Avian Influenza

Brazil has maintained its avian influenza-free status through stringent measures implemented in the industry. In 2023, Brazil recorded three cases of avian influenza in backyard flocks in Espírito Santo, Santa Catarina, and Mato Grosso do Sul. Consequently, the Japanese Ministry of Agriculture, Forestry, and Fisheries (MAFF) authorities temporarily closed the market to the affected states. Fortunately, after a quarantine period, the embargoes were lifted, indicating the effectiveness of Brazil's containment measures and its commitment to maintaining a disease-free poultry industry.

Brazilian government authorities are actively collaborating with importing countries to ensure transparency and share information regarding avian influenza cases and measures taken. Since Mar-24, delegations from the UK, Japan, and the European Union (EU) have visited Brazil to assess the effectiveness of bird flu control measures and evaluate Brazilian surveillance systems.

Additionally, the Ministry of Agriculture, Livestock, and Supply (MAPA) has been proactive in negotiating regionalization agreements with major importing countries. These agreements aim to limit the impact of avian influenza outbreaks by isolating affected areas, ensuring that only specific regions or municipalities are affected rather than the entire country. This concerted effort demonstrates Brazil's commitment to safeguarding its poultry industry and maintaining its reputation as a reliable supplier in the global market.

Floods in Rio Grande do Sul Raises Concern to the Poultry Industry

Despite the optimistic forecasts for chicken production and exports in 2024, Brazil’s poultry industry is currently facing significant challenges stemming from recent floods that devastated Rio Grande do Sul, particularly its central region. The Center for Advanced Studies on Applied Economics (CEPEA) reports that these floods destroyed critical infrastructure such as roads and bridges, disrupting the transportation of essential farm inputs like corn and soybean meals to production facilities. Also, slaughterhouses were compelled to reduce operations due to the inability to receive new batches of poultry, while the transportation of meat to markets was severely hampered. Furthermore, some regions affected by the floods experienced power outages, posing additional challenges for the poultry sector.

Figure 3: Severity of Floods in Rio Grande do Sul, Brazil

In response to this tragedy, competing Brazilian meatpackers have collaborated to mitigate the disruptions caused by the extensive flooding. However, experts caution that a full recovery of operations will require time, and the industry will need comprehensive support and strategies to minimize the impact of the floods. Given the delicate nature of the situation, the sector must remain vigilant to prevent major issues, particularly concerning animal health and the well-being of workers involved in the poultry production process.

Conclusion

In conclusion, Brazil is anticipated to sustain its prominence in the global poultry market, driven by its strong production and export capabilities. The country stands to benefit significantly from the current equilibrium between supply and demand in the global chicken market as some competing countries grapple with a resurgence of avian influenza. Moreover, Brazil's chicken export prices are projected to stabilize in the foreseeable future, aligning with the five-year average. This stability, coupled with Brazil's robust production capacity, positions the country favorably for continued success in the poultry industry on the global stage.