There’s a dearth of corn needed to feed all of the hungry chickens in Brazil, the world’s biggest exporter of the meat.
The nation’s chicken processors were forced to reduce production by 10 percent over the past three months, said Francisco Turra, president of Brazil’s chicken and pork exporters group, known as ABPA. Large and small producers have shut down plants, cut work shifts and enforced mandatory vacation for employees in a bid to lower output, Turra said.
Dryness has been such a problem for corn growers in Brazil, normally one of the world’s top exporters, that the government has suspended import tariffs to make it easier to get supplies. Even still, consumers have been struggling to find enough grain as the nation’s declining currency made farmers more interested in selling to foreign buyers. Domestic prices have more than doubled over the past year amid the squeeze.
“This corn scarcity was the surprise of the year,” Turra said in a telephone interview from Sao Paulo. "The supply outlook had a major deterioration in the past months."
The shortage has impacted chicken processors including JBS SA and BRF SA, the nation’s top producers. There are signs that lowered output could continue for some time. Cooperativa Agroindustrial Aurora, Brazil’s third-largest exporter of the meat, said Monday that it will cut production by 50 percent in July and August at its Abelardo Luz plant, in Santa Catarina state. A slump in domestic demand, mostly caused by an economic recession, has also been forcing companies to reduce production.
“Companies are taking different measures in order to avoid further losses,” Ricardo Gouveia, executive director at Santa Catarina’s producers group, known as Acav, said by telephone.
Minuano closed a plant in Passo Fundo, Rio Grande do Sul state, and fired 300 workers after a supply contract with JBS finished, Turra said. JBS, Brazil’s No. 2 chicken producer, confirmed it decided not to renew a supply contract expiring on April 30 with Minuano. Production capacity provided by Minuano was reallocated to other units, JBS said in an e-mailed response to questions, without providing further details.
Santa Catarina-based Globoaves halted production for 20 days in its Lindoia do Sul plant, said a person with direct knowledge of the matter. Workers returned to work on Monday, but slaughtering at the unit was cut to 40,000 chickens a day from 50,000, the person said, asking not to be identified because the information isn’t public.
BRF, Brazil’s top chicken producer, reported below-expected results in the first quarter as the company struggled with a surge in domestic prices for corn combined with a chicken-supply glut that sent export prices down, Chief Executive Officer Pedro Faria told investors in a conference call on April 29. The company didn’t immediately respond to questions on production adjustments.
Producers are expected to have some relief in a few months as corn imports pick up and the country’s winter-crop harvest advances, Turra said. Chicken processors are increasing grain purchases from Argentina and Paraguay. The nation’s corn imports could reach 1.5 million metric tons this season, five times more than last year, according to ABPA.
To contact the reporters on this story: Tatiana Freitas in Sao Paulo at firstname.lastname@example.org, Gerson Freitas Jr. in São Paulo at email@example.com. To contact the editors responsible for this story: Simon Casey at firstname.lastname@example.org, Robin Saponar
©2016 Bloomberg L.P.