Brazil’s Meatpackers Idle Plants as Domestic Beef Demand Shrinks

Brazilian meatpackers are idling plants as they struggle to pass on escalating costs to financially-strapped consumers who are eating less meat.

Some 45% of the nation’s slaughterhouse capacity is idle, the most in data assessed since 2012, according to Rodrigo Queiroz, an analyst at Sao Paulo-based firm Scot Consultoria, which collects production figures from 13 states.

Producers are getting squeezed as growing meat exports to China boosts cattle prices. The slaughterhouses can’t fully pass on the higher costs to consumers struggling with near-record unemployment. Data from agricultural agency Conab shows per capita beef consumption in a nation reknowned for its steaks fell 5% to 29.3 kilograms (64.6 pounds) in 2020, its lowest level since 1996.

While the strong Chinese meat demand and weaker Brazilian currency have cushioned the impact for companies allowed to export, about three-quarters of cattle slaughtered in Brazil are still sold in the domestic market, according to Scot. Brazil beef shipments to China rose 33% in March versus a year ago, according to data on the Brazilian Trade Ministry.

Brazil’s Meatpackers Idle Plants as Domestic Beef Demand Shrinks

The price that slaughterhouses pay for cattle has surged 57% in the past year to over 316 reais ($56), according to Cepea, a research arm of Sao Paulo University. Supply is tight as farmers withhold cows from slaughterhouses, keeping them for breeding after calf prices climbed to a record.

Earlier this month, meat-packer Frigol announced it will shut one facility in Goias state and keep operating only in the plants which can export. Some other companies have given paid time off to employees to offset part of rising operating costs. “Most of paid time off has been given by small and medium meat-packers and some non-exporting facilities from major companies,” Queiroz said.

The export demand is further squeezing domestic market, said Scot’s analyst Felipe Fabbri. Last month, cheapest parts of beef were sold in the wholesale market at prices 12% higher from a month earlier due to high cattle prices, according to Scot.

“We are seeing Brazilians reducing meat consumption as unemployment rate reaches a record and emergency aid for low-income people was disrupted by the end of last year,” Fabbri said. Brazil resumed in April a new aid payment of a value equivalent to less than half of the last year’s.

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