Brazil: chicken champions of the world
Poultry seems to have a special place in the hearts of Brazilians. The nation has the highest per capita consumption in the world – 47.4kg a year – and still manages to export more chicken than any other country.
There are other signs as well. The vice-president of Brazil attended the country’s recent international poultry conference, and called the high chicken consumption a “symbol of going from poverty to the middle classes”.
Plus, it’s more than a foodstuff; poultry production is a huge employer and big source of revenue, adding value to the grain and soya that grows abundantly in the country.
The Brazilian poultry story is one of borrowing the best bits of vertical integration, genetics and sanitation over the past 60 years from around the world.
Immigrants, particularly those from Japan, brought the latest intensive livestock-rearing techniques with them from countries that needed to innovate in order to produce sufficient food.
Food companies soon realised chicken can be grown less expensively if it’s as close to its inputs as possible.
Brazil has the corn and soya for feed, abundant water and a year-round tropical climate which helps keep heating bills down.
It also has massive land resources and a young, aspirational workforce. Poultry production is presented as a way of linking thousands of small producers in rural parts to the global food supply chain, says Adriano Zerbini, market relations manager for the Brazilian Poultry Association (UBABEF).
He says Brazil’s resource allocation makes the country one of the most solid bases for poultry production in the world.
Moreover, if you speak to producers in the country, they see their role as sustainable producers who export to countries that can’t sustain their own agriculture – that’s why Saudi Arabia counts itself as the country’s largest customer, closely followed by others in the Middle East.
Domestic market
Despite the focus on exports, the country has a domestic market that’s shown strong expansion.
Although Brazil’s annual economic growth has dipped below double digits since the global economy crashed in 2008, the inertia that gripped Europe and North America has passed it by.
“Brazil has lost competitiveness; our poultry used to be 60% of the US price, today it is a similar cost,” he says.
We are also not improving at the speed we need to with logistics.” Mr Batista adds that Brazil needed to use its “Godly gifts” for agriculture but “pay attention to the things we can control”.
Between 2000 and 2012 Brazil almost doubled its poultrymeat production – up to 12.6m tonnes last year.
“We consume about 70% of what we produce,” says Mr Zerbini. “Our base is still the domestic market, and its role is very important.
“We feel we have a complementary role in assuring access to poultry meat across the world. This helps maintain prices at reasonable levels and also involves an element of risk mitigation.”
This “complementary” role, in practice, translated to 56,000t of frozen poultrymeat finding its way into the UK in 2012, accounting for about 8% of total imports. “Europe imports a lot of breast meat and exports the products that it doesn’t eat,” says Mr Zerbini.
He adds that, typically, Brazilian poultry takes a 5-15% share of a destination country’s chicken market, and doesn’t seek to displace domestic production any further.
Aside from Europe, Brazil has established markets in Japan, the Far and Middle East, producing specific products for these markets, and is the largest producer of halal chicken in the world.
Trade prices
Earlier this year there was a sharp drop in wholesale poultry prices in Brazil, as exports dropped but production did not fall in line. Now prices are beginning to pick up in the second half of the year, according to analysts Rabobank.
The Brazilian real has weakened – while international poultry prices have remained relatively high – making chicken prices more competitive with other major exporters.
Its wholesale price is now put at BRL 3.06/kg (£0.85). This, Rabobank says, is 23% higher than June 2012.
Rabobank also reports Brazil is losing its share of exports to the EU, down 10%. Thailand is picking up this surplus, having recently had an import ban lifted.
Eggs
Egg is a different story in Brazil. The country has one of the lowest per capita consumptions (162 eggs a year in 2012) and its exports are about 95% fresh – it markets them almost exclusively to neighbouring countries and produced 2m tonnes last year.
But there are big opportunities – notably selling to nearby egg mega-consumer Mexico, and further afield if the country develops its liquid and powdered egg processing, which accounts for less than 1% of exports.
As Mr Zerbini says, “Egg is a real market for expansion – there’s a whole world to be discovered and explored in processed eggs.”
Read November’s Poultry World for profiles of two businesses that export their poultry products to Europe.
Despite challenges, there’s cause for optimism
Leopoldo Saboya, Chief financial officer BRF
Brasil Foods BRF boasts a portfolio of 3,000 different foodstuffs, and employs around 110,000 people in Brazil alone. Its sales are split 60% domestic and 40% export.
Mr Saboya says that Brazil’s strengths can also be its weakness. Grain from the isolated Mid West region can cost more than imports (because of poor road quality), and the country’s cheap labour bank is being eroded as minimum wages rise.
Commercial blocks and delays in trade agreements are also hampering the country. “Cost has increased without an increase in productivity,” he says, referring to a “consistent” drop in exported meat following the “golden years” surrounding 2005.
Despite this, Mr Saboya points to increasing protein consumption across the world as countries – including Brazil – develop middle classes. He feels that the industry can operate sustainably without the “ballast” that cheap labour and a weak currency create.With a population of 160 million and domestic consumption at 45kg a year, “chicken is champion”, he says.
Bureaucracy and logistics are crippling competitiveness
Wesley Mendonça Batista, Chief executive officerJBS
JBS is the largest multinational food processing company in the world – and the biggest for revenue in Brazil. Globally, it employs 185,000 people, and slaughters 90,000 cattle, 70,000 pigs and 12 million chickens every day.
According to Mr Batista, Brazil’s land, water and “hard working people”, gives the country a “God-given competitiveness” – a perfect place for producing food. But it is losing this competitiveness through crippling bureaucracy and employment legislation.
He explains that to keep abreast of red tape caused by Brazilian tax and employment laws, the firm has 50 lawyers on its staff and a further 50 on retention – compared with just four keeping an eye on its US operations.
Poultry production will thrive where it is most sustainable
James Young Group vice-president, Tyson International
Tyson is a global food business generating sales of £21bn every year. The firm estimates that it produces one-in-five pounds of chicken, beef and pork in the USA and, in 2008, it bought three poultry businesses in Brazil that now make up part of Tyson’s international arm.
Mr Young says Tyson is focused on growing its poultry production for the international export market, because it has the most potential for expansion. It slaughtered a shade over 40 million birds every week in 2012.
He believes Brazil, the USA and Argentina will move into a surplus position by 2050, and Africa, the Middle East and Europe will fall into a deficit for protein and grain production
“In Europe, agriculture is not growing,” he says. “Can we afford to ship grain around the world, or will the global market finally develop enough to create a global production base?”
Despite this he concedes that Europe has created a market where “fresh is at a premium”, and it’s a market the USA or Brazil can’t touch.
Mr Young sees a lot of potential in Brazil, pointing to the fact that the USA had exhausted its land base but, like it or not, Brazil still has a lot of land that is not currently agriculturally developed.