Disappointing export performance for Brazil
The previous increase in Brazilian pork exports came to an end in the first half of 2017, with volumes shipped between January-June 2% lower than year earlier levels.
The Brazilian meat scandal in March was a contributory factor but even before then, the year on year growth had been slowing down since the second half of 2016, with the exception of January 2017.
In the aftermath of the scandal, exports of pork from Brazil were well down on previous months and year earlier levels in April and May, with shipments falling by 16% and 24% respectively year on year. However, trade picked back up in June and was marginally (1%) higher on a year earlier.
The scandal has had a particularly marked impact on Brazil’s pork trade with China, which had been increasing steadily. In the second quarter of the year Brazilian exports were down by two thirds, compared to April-June 2016. However, Chinese import demand in general has been softening this year, which would have contributed to some of the decline. There was also some disruption in Brazilian shipments to Hong Kong with January-June exports down 25% on the year. However, the decline has steadied with exports in June only 6% lower than year earlier levels.
There was also some disruption in Brazilian trade with Argentina and Uruguay but this was mainly confined to April. Similar developments applied to Angola and Singapore.
In contrast Russia consolidated its position as the largest market for Brazil, accounting for 45% of trade in the first half of 2017. While month on month trade did ease back in April and May, exports increased sharply in June to 50% more than year earlier levels.
There was no obvious impact of the scandal on export prices however. In January-June 2017 the average export price was up 32% on the same period in 2016, to US$2,520 per tonne leading to the value of exports increasing by 29% on the year to US$740 million. However, given the appreciation of the Brazilian currency, the export price was only up 15% compared to a year earlier in real terms.
It will be interesting to see whether Brazil can re-establish itself as an increasingly important supplier to China. If it has permanently lost market share it will improve prospects for other suppliers such as the EU and North America, with consumers in China very sensitive to food scandals. The Brazilian scandal has certainly created uncertainty for its pig meat sector, with domestic pig prices falling in 2017, although feed costs have also declined.
Leo Colby, Consultant