By Ana Mano SAO PAULO, Nov 6 (Reuters) - Larger grain price
By Ana Mano
SAO PAULO, Nov 6 (Reuters) – Larger grain prices are seen weighing on protein processors like BRF SA BRFS3.SA and JBS SA JBSS3.SA once they report third quarter outcomes subsequent week at the same time as export markets stayed robust within the three-month interval.
Whereas China remained a key export vacation spot shopping for ever-larger meat volumes from Brazil and different origins, it’s now paying decrease premiums, in keeping with a Nov. 2 report from HSBC analyst Alessia Apostolatos.
“The weaker Brazilian actual is a double-edged sword that has made Brazilian protein exports extra aggressive globally, but additionally elevated enter prices,” Apostolatos stated. “China has been capable of negotiate decrease costs and take in larger portions because it continues to face African swine fever (ASF) pressures.”
Chicago soy futures Sc1 hit a four-year excessive this week as dry climate spurred provide issues in high producer Brazil. Corn Cc1, one other key livestock feed ingredient, soared 46% in native forex over the third quarter.
However the impression of upper enter prices is totally different for JBS and BRF, given their distinct product portfolios and manufacturing base, Banco do Brasil analyst Luciana Carvalho stated in an interview on Friday.
In america, the place JBS will get 70% of its gross sales, the impression on third-quarter margins from larger grain prices was in all probability much less vital due to nonetheless ample cattle availability, Carvalho stated.
For BRF, which is concentrated on hen and pork, larger feed costs could possibly be extra of a problem although the corporate’s corn inventories, usually lasting three or 4 months, present a cushion, she added.
Larger prices in Brazil compelled meatpackers to shift towards higher-margin exports and processed meals that promote for extra. As such, each JBS and BRF benefited from the Brazilian authorities’s money help program throughout the pandemic, which allowed households to spend the additional revenue on meals.
On a much less optimistic be aware, BRF nonetheless faces import restrictions imposed by Saudi Arabia, weighing on Halal meals gross sales within the Center East. For JBS, tight cattle availability in Australia and Chinese language export restrictions are key points, Carvalho stated.
On the similar time, robust demand for pork on home and worldwide markets, particularly from China, ought to offset larger feed prices and shield margins in Brazil’s hog processing trade going ahead, Carvalho stated.
In October, all Brazilian meat firms underperformed the benchmark Bovespa index as document cattle, corn and soy costs enhance overhead.
BRF reviews quarterly earnings on Nov. 9 whereas JBS reviews on Nov. 11.
(Reporting by Ana Mano Enhancing by Marguerita Choy)
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