Brazilian beef production expected to rise

Cattle Market & Farm Reports, Editorials
Feb 21, 2005
by WLJ
Production of beef and pork in Brazil is estimated to increase in 2005 by six and three percent, respectively, reflecting a rebound in domestic demand and higher exports, although at a lower pace than last year due to a less competitive exchange rate relative to the U.S. dollar, according to an attache report posted Feb. 15 on USDA's Foreign Agricultural Service Web site.
Economic analysts foresee economic growth in 2005 in the range of four-five percent, lower inflation rates around 5.6 percent, a further decline in the unemployment rate, and higher real income. These indicators are likely to influence consumer confidence as domestic consumption supports economic growth in 2005. Last year, exports accounted for most of the growth in the GDP. However, market analysts are also cautious about this optimistic outlook for the economy in 2005 because of the Central Bank's tight monetary policy with higher interest rates (currently the prime rate is fixed at 19.5 percent) and the appreciation of the Brazilian currency relative to the U.S. dollar (currently averaging 17 percent).
Brazilian beef production is projected to increase six percent in 2005. Higher consumer confidence and purchasing power will increase demand for beef and higher beef exports, although at a lower rate than last year, will both contribute to increase in beef production in 2005. However, some analysts estimate that the current Real/U.S. Dollar exchange rate (a US$1 equals R$2.60 at the moment the report was written) could adversely impact exports of beef in 2005.
Pork production is also expected to increase by nearly three percent in 2005, due to a combination of higher domestic demand and higher exports. However, pork producers are expecting lower profitability due to the relative increase in production costs and the appreciation of the Brazilian currency relative to the U.S. dollar. The increase in production will come mostly from new investments in production.
Beef production is expected to reach nearly 8.5 million metric tons in 2005. The revised estimate foresees an increase in domestic demand for beef due to higher consumer confidence and purchasing power; another record in beef exports, although the increase in exports will be at a lower pace than last year due to problems with Russia, a less competitive exchange rate relative to the U.S. dollar, and a combination of domestic economic factors. Some of these constraints may be minimized with increased exports to China and other markets.
Beef exports are projected to increase by an average of 14 percent in 2005 and to set another record. However, the increase in beef exports will be at a lower rate than last year because Brazilian meat exporters are facing some impediments. Those include a less competitive exchange rate and a Russian ban on most Brazilian meat imports. Except for the state of Santa Catarina, which is not a beef producing state but is a main pork and poultry producer, Brazilian beef from other major states is not allowed to be exported to Russia. The ban is due to the outbreak of FMD in the state of Amazonas, but has mushroomed into an ongoing political dispute between the two nations.
Pork production is expected to reach nearly 2.7 million metric tons in 2005, slightly higher than our previous estimate made in the annual report, and nearly 3 percent higher than last year. The increase is the result of higher demand from both export and domestic markets. Pork exports are expected to increase by 3 percent in 2005, and set another record, despite the problems of related the appreciation of the Brazilian currency and the Russian ban on Brazilian meat in general. The Russian ban was partially suspended on November 20, 2004 to allow exports from the State of Santa Catarina, which partially benefits pork exports. — WLJ
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