Brazil’s cattle production this year is expected to grow 1.3% to 48.5 million head, as the industry reaches its peak in the production cycle, said the USDA’s Foreign Agriculture Service, in a semi-annual report.
OVERVIEW
Cattle slaughter is expected to rise 2.8% because of elevated demand for beef exports and to feed recovering domestic consumption, the report said. However, cattle producers likely will face challenges of high production costs, potential droughts and the consequential pasture damage.
As a result, Brazil’s beef production is expected to increase 2.1% to 10.6 million tonnes, of which 28%, or 3.0 million tonnes, would be exported.
For swine, the FAS expected production to rise by 2.1%, reaching 45.8 million tonnes. Just like last year, swine and pork producers likely will face elevated feed and production costs.
Pork production is expected to grow 3.9% to 4.52 million tonnes and it is expected that exports will increase by 7.4% and domestic production by 2.3%.
CATTLE NUMBERS
The FAS forecast that this year, total cattle production will grow 1.3%, to 48.5 million. Considering the beginning stock of 194.4 million as well as the production and slaughter numbers for last year, the FAS anticipated the ending stocks to remain almost unchanged at 194.7 million head.
The new forecast is slightly higher than the FAS estimated in the last Gain Livestock Report, mainly because of the reduction in certain production costs. Animal feed prices were on a downtrend at the end of 2022, and market projections confirm this trend through 2023. Also, the cost of calves and feeder cattle have been falling and should continue to do so in 2023, providing an incentive for breeders to expand their herds.
As the Brazilian cattle production cycle reaches its peak, the growing availability of cattle will pressure animal and beef prices this year, the FAS said. From the end of 2022 to early 2023 there were incentives for producers to increase production, but slaughterhouses had less income and very small profit margins because of low domestic demand.
That presents challenges for beef producers and distribution channels in Brazil, the FAS said. Yet the high export volumes of 2022 and the rising prospects for new foreign markets are helping to maintain slaughter house business.
SWINE, PORK PRODUCTION
Although swine production remains a risky and almost unprofitable activity, two main factors should lead to an increase in animal production, the FAS said. The demand for pork in the global market is up, while domestic demand was expected to be relatively steady.
Also, prices for corn and soybeans were expected to remain fairly stable, although a variety of factors could push them up or down.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $166.52 to $166.59 per cwt, compared with last week’s range of $159.00 to $165.08. FOB dressed steers, and heifers went for $260.37 to $260.51 per cwt, versus $254.08 to $261.83.
The USDA choice cutout Monday was up $0.88 per cwt at $290.20 while select was down $0.39 at $276.47. The choice/select spread widened to $13.73 from $12.46 with 67 loads of fabricated product and 27 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were $1.55 to $1.70 a bushel over the May corn contract. Bids in Kansas were steady at $0.75 over May, which settled at $6.37 a bushel, down $0.02 3/4.
The CME Feeder Cattle Index for the seven days ended Friday was $187.21 per cwt, up $1.78. This compares with Monday’s Mar contract settlement of $192.07 per cwt, up $2.07.