Demand underpins industry margins from pigs, says Rabobank

Firm demand for pork in the domestic market and also in the external will sustain the banks ' healthy ' Brazilian pork industry in this second half, evaluates the Rabobank. In a quarterly report released today, the Dutch Bank points out that the high prices of beef in Brazil has also stimulated the consumption of pork as well as — more intensely — with the consumption of chicken meat.
In the evaluation of the Rabobank, the migration of consumption towards beef pork helped raise prices of pork to something close to the historical average, which is significant given that the supply of pigs has been growing in the country. According to the Brazilian Institute of geography and statistics (IBGE), the slaughter of pigs increased by 4.1% in the first quarter compared with the same period in 2014, totaling 9.1 million head.
In addition to being favoured by higher consumption at the expense of beef, pork industry also has favorable prospects on the side of costs, evaluates the Rabobank. According to the Dutch Bank, grain prices used in animal feed — input which is responsible for about 70% of the production costs in the industry — tend to be lower in the second half, in comparison with the first half.
In the external market, the Rabobank provides that, despite the fall of the volume exported in the first half — 5.3%, according to the Brazilian Association of Animal protein (ABPA) —, the shipments will recover and 2015 with mild high close. The volume shipped in the first half amounted to 228.4 million pounds, according to the ABPA.
"The Rabobank continues believing that Brazilian exports of pork will grow during 2015. But it is likely that the volume stay closer to the 2014 levels than initially planned, "designed the Bank. Last week, the ABPA has predicted that exports can grow to 3% in 2015 before the 505.7 thousand tons of 2014.
According to Rabobank, the devaluation of the real against the dollar can boost the competitiveness of Brazilian pork in the second half, which can promote exports.
However, the caveat that only Brazil Bank offers six   plants designated for export to China, which may limit opportunities. Largest global consumer of pork, the Asian country must record imports this year, surpassing 1.4 million tons.