O price of fat cattle arroba plummeted in the first quarter of 2024 in Brazil, and the outlook for the second quarter is even more negative, according to the analyst and consultant at Safras & Mercado, Fernando Iglesias.
The statement was made this Wednesday (27), during the 7th edition of Safras Agri Week.
According to Iglesias, it is recommended that livestock farmers adopt protective measures for the 2nd quarter of this year, anticipating the likely drop in market prices.
“We are dealing with a large volume of animals available in this first quarter. There is a tendency for this to affect margins and profitability, which can represent a significant difference when it comes to balancing the books,” he says.
In the first quarter, there was a significant increase in the number of females available, which also played a role in reducing cattle prices across the country.
Furthermore, replacement and calf prices are attractive.
“For those who work with fattening, it is important to consider purchasing replacements, taking advantage of the favorable exchange ratio and investing at this time. The significant discard of females will have effects in the medium and long term. Current calf prices will not remain as low from the second quarter onwards and into 2025”, he warns.
According to the analyst, in the 1st quarter, with less money in their pockets, consumers migrated to cheaper proteins, such as chicken and pork.
The movement put pressure on beef prices, making sales difficult.
Opportunities
Iglesias highlights the animal nutrition scenario, which offers several alternatives on the market at lower prices.
“The cost of confinement is relatively low in Brazil. However, what could weigh in is a potential drop in B3 futures, making confinement less attractive. This could lead producers to be more cautious and not make intensive investments this season. The behavior of confinement will largely depend on future prices in April and May,” he highlights.
Iglesias expects Brazil to register a record volume of slaughter and production in 2024.
In February, the highest level of slaughter in history was observed, increasing 31.33% compared to the same period in 2023.
The growth in the slaughter of females accumulated in the year was 33.6%. However, internal availability is expected to fall by 1.99%.
“The replacement market offers many investment opportunities, both in rearing and fattening. Brazilian producers have invested a lot within the gate, but they also need to be professionals outside of it, protecting the investments made in the sector. The big challenge, however, is that prices will not be as favorable in 2024. Exports will play a fundamental role in balancing domestic supply, which is detrimental to prices in Brazil. In short, the country will see a large amount of meat being exported this season,” he says.
China’s role in the cattle market
Analyzing the international market, Iglesias highlights the crucial role of China in beef imports from Brazil.
He explains that, for Brazil to achieve favorable economic performance, it is essential that the Asian giant is also in a stable situation.
“There are challenges in China that go back to 2023. Major industries were struggling with inflation and so they offered higher interest rates. However, with China, the dynamics are different: the country needs to stimulate the economy with lower interest rates and accessible credit. The problem with keeping interest rates low is that it can lead to currency devaluation. The Chinese currency is quite devalued at the moment. With China being a large global importer of commodities and a leader in several sectors, the world market sees Chinese producers reducing prices in dollars to compensate for this devaluation”, explains Iglesias.
