Female cattle belong in farms
Cattle farmers retain their cows for the productionof calves, nowfetchinggood
prices, while the cattle breedingcycle is expectedtoget backon track in 2017
Narrow margin
Many meat packing industries have had
difficulty purchasing animals and prolonging
their scales, which operate three to four
days, according to researcher Guilherme
Cunha Malafaia, fromEmbrapa Dairy Cattle,
in Campo Grande (MS). The occurrence
of occasional price decreases of meat on
the bone in wholesale stores, due to scarce
demand for this type of meat, have affected
the commercializationmargins of the
industries. “This could be a limiting factor
for the higher prices of fat cattle per arroba
in the short run”, he observes. “Some meat
packing industries have decided to reduce the
number of their slaughters, so as to keep their
scales more prolonged. Weak consumption is
perceived at the final extremity of the supply
chain, that is, final consumers.”
According to Malafaia, this weak
consumption affects supermarkets and
butcher shops, which, in turn, will
purchase less meat from the meat packing
industry and, consequently, farm-gate
sales will also drop. Furthermore, the
reduction in beef cattle slaughters results
into a complex environment for the meat
packing industries, as retail demand
remains low and, at the same time, animal
offer does not go up. Although accounting
for 20% of Brazilian production, if the
foreign market continues on the rise, it
could keep profits stable for beef farmers
and higher margins for the industry.
Higher calf prices affect feedlot operations,
in a scenario that started in
2014
With calf prices outstripping meat prices
in the domestic market, cattle breeders are in-
duced to retain their cows on the farm. This
has reduced the number of animals that are
slaughtered throughout the Country. As a re-
sult, feedlot owners and beef finishers will in-
cur higher costs, and need to be very efficient
if they want to derive profits from the activi-
ty in this season. The scenario that has been
unfolding since early 2016 is following on
the heels of the 2014 and 2015 itinerary, that
is, cattle breeders negotiating almost only fe-
male cattle that failed to get pregnant during
the breeding season, whilst retaining the fer-
tile cows with the aim to produce calves.
Although demand for meat in Brazil is
on the decline, and the blame goes to high
unemployment, increased competitiveness
from alternative proteins, political instabil-
ity, fat cattle prices continue stable, except
in moments when there is pressure towards
price declines, influenced by the margins of
the industry, as witnessed in March. In the
meantime, beef prices are supposed to remain
high until de end of the year, taking into con-
sideration the natural trend in the second half
of the year in the past five years. This situation
has a lot to do with the shrinking offer of fe-
male cattle to the meat packing companies.
Taking into account the past years, in 2013
female cattle accounted for 42% of all slaugh-
ters; in 2014, the number dropped to 41.8%;
and in2015, they almost reachedhistorical lev-
els, representing only 38.9% of the amount of
animals slaughtered by themeat industry. The
figures of the first quarter in 2016 still show a
low share of female cattle, even considering
that January through March is the time when
the cows that fail to get pregnant during the
breeding season are negotiated. The drop in
male slaughters remained at 1.5% in the past
season, while in female cattle it reached 25%.
On the other hand, in the first quarter in
2016, the considerable number of 2.9million
females were slaughtered, the smallest num-
ber since 2010. They represented 40.1% of
the total slaughters, against 44% in the first
quarter in 2015, according to data from the
Brazilian Institute of Geography and Statis-
tics (IBGE). Due to the high reposition pric-
es – calves and lean animals – and high costs
of feed components (corn, in particular), the
production cost of fattened cattle skyrocket-
ed. This, associated with declining domestic
demand, has been interfering in the projec-
tion of confinements throughout Brazil in
2016, and it equally prevents us from antic-
ipating any significant price increase.
Analysts of the sector are projecting an
average margin of 10% for confiners and a
maximum increase of 2% in the number of
confined animals, to 745 thousand head. Ac-
cording to the Brazilian Association of Cat-
tle Confiners (Assocon), in 2015 there was
a reduction of 5% in the number of animals
confined at its 85 associated projects in eight
states, to 731 thousand animals.
The expectation expressed by analyst Hy-
berville Neto, from Scot Consultancy, is for
the market to keep stable prices until the final
quarter in 2016. “The undeniable fact is that
the cattle breeding cycle is bound to get stable
throughout 2017, with bigger offer of reposi-
tion animals and weaker relation with regard
to fattened cattle”, he explains. This means
that the trend is for the Country to experi-
ence a wave of stability in 2017 and 2018, with
chances for a reversal of the cycle, with a re-
sumption of female cattle for slaughter. Bigger
offer of animals, if not sustained by rising con-
sumption, results into depressed prices com-
pared to production cost and inflation.
26
