Drop in Brazil corn prices should ease cost pressure on meatpackers

A sharp drop in corn prices in Brazil should provide some relief for the poultry and pork industries this year, the president of meattrade group ABPA said on Tuesday, BRF SA, BRFS3.SAJBS SAJBSS3.SAand other companies gear up to release first-quarter results in coming days.

Corn and soy are used as livestock feed and account for about 70% of production costs of chicken and pork. Corn prices fell by nearly one third in the domestic market, as the country expects to harvest a new record crop in coming months.

In Campinas, Sao Paulo state, corn prices are close to 60 reais per bag, down 28% this year and well below the highs of more than 100 reais per bag in 2022.

This is a boon for food companies like BRF, which posted consecutive losses in 2022 partly due to high feed costs.

“The industry is in no hurry to buy corn,” said Ricardo Santin, head of ABPA. “Nowadays things are better for the grain buyer, we are finally recovering some of the losses we had in the past.”

In the worst moments of corn supply, the meat industry was forced to pay premiums on corn destined for export markets to keep the grain in the country, Santin said.

According to private consultancies, Brazil will produce close to 130 million tonnes of corn, a record, with exports likely to surpass 45 million tonnes in 2023.

Lower corn prices restore “balance” in the industry, Santin said, adding that even at these levels corn remains an attractive commodity for farmers to cultivate.

“When there is a reduction in the cost of production, the industry can maintain stable [food] prices,” Santin said. “The good news about inflation is that it won’t rise, at least on our part.”

Tags: corn, Brazil, prices, Meat