Meat is cheaper with greater supply in Brazil – 06/06/2023 – Market

After shooting the pandemic, beef inflation shows signs of relief for the Brazilian consumer’s pocket. The main driver behind the truce is the greater supply available in 2023 domestically, analysts say.

According to them, producers took advantage of rising prices in recent years to reinforce investments, which generated an increase in production capacity in the country.

With more options for the consumer, projections indicate that beef, like other foods, should stay away from the list of the main villains of inflation in 2023.

From January to April, meat prices recorded four consecutive monthly lows in the IPCA (Broad National Consumer Price Index). The biggest fall was in February (-1.22%), and the smallest, in April (-0.45%).

Published by the IBGE (Brazilian Institute of Geography and Statistics), the IPCA is considered the official inflation index in Brazil.

According to the survey, meat prices accumulate a drop of 3.16% this year (January to April) and a drop of 4.40% in 12 months. In equal periods of comparison, the IPCA rose by 2.72% and 4.18% in the general average.

“In the case of beef, the issue is the greater availability of the product on the domestic market. This goes far beyond the embargo on exports to China [ocorrido no primeiro trimestre]”, says Fernando Henrique Iglesias, analyst at consulting firm Safras & Market.

From January to March 2023, cattle slaughter in Brazil grew by 4.7% compared to the same period in 2022, according to the IBGE.

“The excess supply has to be explained by the increase in investments in the sector from the second half of 2019. The money invested translated into an expansion of productive capacity”, says Iglesias.

In 2023, the domestic availability of beef in the country should rise 6.44% compared to 2022, estimates Safras & Market.

Price falls, but still high, says economist

In addition to the greater supply, the lower pressure from animal feed costs also helps to explain the context of prices, according to economist Jackson Bittencourt, coordinator of the economic sciences course at PUCPR (Pontifical Catholic University of Paraná).

This movement comes in the wake of the loss of breath in the prices of agricultural commodities such as corn and soybeans, used in the production of animal feed.

“There is an association between an increase in the supply of meat and a reduction in production costs”, says Bittencourt.

According to him, the expectation is that prices will have further falls for the consumer throughout the year. Even so, they should not return to the pre-pandemic level, projects the professor.

“It’s a price that is still high. It’s going down, but it shouldn’t reach the pre-pandemic”, says Bittencourt.

In the capital of São Paulo, the average value of a kilo of prime meat was calculated at R$ 41.01 in April, according to a survey by Procon-SP in partnership with Dieese (Inter-union Department of Statistics and Socioeconomic Studies).

This price was 2.4% below the level of December 2022 (BRL 42.01) and 11.2% below the level of April of last year (BRL 46.18).

Even so, it still surpassed by 71.2% the value of April 2019 (BRL 23.95), the period before the pandemic, according to the same survey.

A study produced by economists at Banco Santander also points to the high supply of meat as responsible for the relief in consumer prices.

The picture would be associated with the so-called cattle cycle, with the slaughter of a higher percentage of females this year.

The report considers that, if the slaughterhouses decide to rebuild margins or there is demand pressure with the wage bill of Brazilians, the fall in prices could be mitigated.

The perspective, however, is that the greater supply will prevail over the other factors, according to the report, signed by economists Felipe Kotinda, Daniel Karp and Gabriel Couto.

The analysis points out that the deflation (fall) of meats can reach 4% in annual terms in the IPCA until December.

Picanha becomes a political issue

On social media, publications by the Luiz Inácio Lula da Silva (PT) government and allies try to value the recent truce in prices. With last year’s elections, meat consumption also became a topic of political dispute in the country.

Candidate at the time, Lula went so far as to say that Brazilians should go back to barbecuing and eating picanha, which is traditionally one of the most expensive cuts.

In the IPCA, the meat segment comprises 18 sub-items. In the accumulated result for the year (until April), 16 of these cuts had negative variations in prices.

The biggest drop was rump (-5.24%), followed by filet mignon (-5.23%) and liver (-4.77%). The picanha retreated 3.80%.

In the accumulated of 12 months, 15 of the 18 cuts had falls until April. The biggest decrease was that of the liver (-8.25%). Breast (-8.18%) and chuck (8%) followed. The smallest decrease in 12 months was that of sirloin steak, of only 0.09%.

Low for ranchers

In a note, Cepea (Center for Advanced Studies in Applied Economics) said last Thursday (1st) that prices for the entire national livestock chain decreased “with some force” throughout May.

Researchers from the institution also indicated that the scenario is mainly linked to the greater supply of animals.

The increased availability in 2023, especially of females, is “the result of investments made by the livestock sector in recent years”, said Cepea.

Until May 31, the Cepea/B3 indicator of prices per arroba of fat cattle accumulated a monthly drop of 10.37%.