In July 2013, Brazil's pig prices were once again around €1/kg SG. Coincidence or not, this was also the case in the two previous years around this time. The multi-year average for Brazilian pig prices is €1.40/kg, if the Brazilian currency is not once again subject to its strong fluctuations. Just over 2 months ago, pork prices were quoted at around €1.60/kg. Why the sudden drop in prices?
Brazil is a net exporter of pork and ranks 4th in the world in terms of pork trade. Falling pork prices suggest first and foremost that domestic and foreign demand has fallen.
In fact, Brazilian pork exports in the first half of 2013 were down 240,000 tons or 10.5% on the previous year. The main reason for this reduction was that access to the Ukrainian market was completely closed until March 2013. Although more pork was redirected to the Russian and Hong Kong markets, this did not fully compensate for this.
The Ukrainian market has been open again since mid-June 2013. The difficult access to the Japanese market also opens up new prospects. However, business is still slow to get off the ground.
The sharp fall in Brazilian pig prices in the foreign trade business is largely due to the strong devaluation of the Brazilian currency, which now stands at 2.82 reals to the euro. In the spring, the exchange rate was still at 2.6 real per euro and the average for the years 2010 to 2012 was around 1.80 real per euro.
In domestic sales, the high inflation rate is having a negative impact on consumption. In preparation for next year's World Cup, a lot of money is being spent on stadium and road construction, which usually involves a lot of corruption. Consumers are strapped for cash, but the cost of living is rising at an above-average rate. As a result, domestic pig prices have also weakened significantly.
Despite the fall in feed costs, the world does not look rosy for Brazilian pig farmers in the coming years. Will the World Cup be able to help?
