Influenced by severe drought this year in the United States, Brazil's corn and soybean markets now face their most profitable export scenarios in years, consequently ratcheting up grain prices within Brazil and straining the meat production sector, according to July trade figures and an August report by Santa Catarina state's Center for Socioeconomic and Agricultural Planning, or Cepa.
Brazil's corn exports in July were up 431 percent over the same month in 2011, and corn exports have been a main contributor to Brazil's record US$80 billion agribusiness trade surplus over the past 12 months, according to the Ministry of Agriculture.
Soybean exports in July were up 10.5 percent by volume over July 2011 to 4.13 million metric tons, and export sales of soybean meal rose 52 percent in the same period.
The Ministry of Agriculture tried to assure the public this week that it was monitoring corn and soy supplies to ensure grains were available for domestic poultry and pork producers.
However, animal feed grains are currently pricing at BRL29 (US$14.33) per kilogram for corn, and BRL71 (US$35.07) per kilogram for soy in the popular swine and poultry producing state of Santa Catarina.
Those grain prices have pushed production costs for some producers higher than the sale price of their live animals, said Julio Alberto Rodigheri, market analyst and agronomy engineer at Cepa.
Swine producers have been facing this pricing scenario with high input costs for more than two months, Rodigheri said, while poultry production costs have more recently caught up to pork's overwhelming scenario.
Passing on costs in pricing for both domestic and export products is easier said than done, because global demand has become more price-sensitive.
The U.S. produces 40 percent of the world's corn supply, with the second largest producer, China, generating a crop just 52 percent of the size of the Americans' with no export potential.
Source: Argentine Beef Packers S.A.
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