Global Chicken Meat Prices Rising while Brazilian Exports Increase

Frozen Whole Chicken

Published Sep 23, 2021

In its latest Brazil-Poultry and Products Annual Report, the USDA forecast a 5% increase in exports for 2021, and 3% for next year to reach 4.17 million tonnes. The positive outlook for the poultry sector in Brazil comes at a time where the industry is experiencing a substantial increase in prices due to high restored demand and rapidly rising input costs for feed grain. Additionally, exports to the Middle Eastern market have increased in the first semester of the year despite Saudi Arabia’s ban on eleven Brazilian poultry plants. The continuous increase in costs for Brazilian poultry is expected to have effects on global prices.

The main reason for Brazil’s growth in the international market is the ongoing outbreak of African swine fever in China since 2018 that has given greater opportunity to Brazilian meat, which has also coincided with the devaluation of the real against the dollar, making Brazilian poultry products more competitive. However, the current increase in global demand, the rising costs of grains for poultry feed, slow production in the US, and rising rates for shipping containers are threatening the competitive advantage of Brazilian chicken broilers.

Brazil will be able to keep boosting its exports

According to the USDA latest report, both the production and consumption of chicken meat in Brazil have reached a historical record this year. With production in 2021 at 14.35 million tons, growing 3% from the previous year and forecast to reach 14.72 million tons in 2022. For domestic consumption, the forecast this year is at 10.3 million tons, also a 3% growth from the previous year and expected to grow up to 10.54 million tons by 2022.

Source: USDA, Tridge

The high restored demand for poultry products globally is led by the comeback of the HoReCa (Hotel, Restaurants, Caffe) industry and the retail stores in western countries. Therefore, the Brazilian market anticipates that this year and next, the country’s producers will continue to benefit from robust global demand, boosted in 2018 by the spread of Avian Influenza that generated production shortfalls in many markets for which Brazilian meat is free. Additionally, exports will continue to benefit from the devalued real, which has lost a third of its value since last year and has struggled to recover.

According to the report, from January to July 2021, Brazil has exported close to 2.5 million tons of chicken meat to the world, a 7% increase compared to the same period in 2020. Although exports are expected to ease down for the rest of the year due to the recent ban from Saudi Arabia on eleven Brazilian poultry plants, an overall 5% increase in exports is expected for 2021.

The Rise in Global Prices drive-by Rising Costs

Since the beginning of 2021, prices in the global chicken meat market have soared due to high restored demand, rising costs for feed grain and food, and a decreasing rate of chicken slaughters in the EU, South Korea, and Japan. Additionally, accelerated costs for shipping containers are taking effect on the growth in export prices.

According to The Food and Agriculture Organization (FAO), export prices for chicken cuts and edible offal from the US increased from USD 977 per ton in January 2021 to USD 1,138 per ton in June 2021. The price for chicken meat in the EU during week 29th of 2021 was EUR 204.5 for 100kg or 10% higher than the same period of the previous year. The domestic chicken market has seen substantial increases in Brazil, and it has not been exempt from the rising global trend. Brazilian broilers have reported a 14% increase in prices in the past year due to the rapid jump in prices for feed grains.

Caio Alves, Tridge’s Engagement Manager in Brazil, has reported that according to broilers based in São Paulo, the average price for live chicken in August closed at USD 1.4 per kilogram, 3.2% higher than July’s indications. They are attesting that high trending corn and soybean-based ingredient costs are driving prices up at global levels. For Alves, in the case of Brazil, there are two main reasons for the price hike; one would be the ongoing diminishing conditions on the US-Midwest production and the improving demand for both corn and soybeans grains.

Source: USDA

Furthermore, the Brazilian Agricultural Research Corporation announced that broiler production costs had become more expensive in August than the previous months of the year, increasing 1.62% month by month. As a result, in terms of yearly costs, the production cost per kilo has gone from USD .70 from September last year to USD 1 per kilo in August this year.

Brazil’s Global Impact on Poultry Exports

In 2020, the amount of chicken meat exported globally was about 15 million tonnes, growing by 3.9% compared with the previous year’s figure. Brazil was the leading supplier with 3.9 million tonnes, followed by the US with 3.5 million tonnes. With Brazil and the US accounting for 49% of the total export share, the continuous increase in costs for Brazilian poultry is expected to have a global impact on prices and the slow production pace in the EU following the bird flu.

According to the USDA report, Brazilian exports will close this year with a 5% growth and will grow at 3% next year. With this scenario, Brazil will remain the largest supplier globally of poultry products with a record high export price, supporting the global price rise.

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