Pork price drops in 12 months, and sector predicts higher consumption

In a scenario of greater supply in the domestic market, the pork showed signs of a truce in inflation for the Brazilian consumer.

In the 12-month period up to June, product prices fell by 5.21%, according to the IBGE (Brazilian Institute of Geography and Statistics).

The drop is the biggest among the 18 cuts that make up the variation of meats in the IPCA (Ample National Consumer Price Index), the country’s official inflation indicator.

Within the segment, in addition to pork, only mutton (-2.15%) and fillet cover (-0.12%) fell in the same period. The biggest increase in meats, on the other hand, was registered by beef sirloin (11.12%), followed by picanha (9.21%).​

In the view of analysts, the truce in pork prices is associated with the decline in exports, which ended up increasing supply in the Brazilian market in recent months.

In the first half, shipments of fresh, chilled or frozen pork fell by 8.4% in volume compared to the same period in 2021, to 458.1 thousand tons, according to foreign trade data made available by the federal government.

The brake on shipments was pulled by China, which shows signs of recomposing the local herd, punished in recent years by African swine fever.

“China, a major importer, is going through a period of rebuilding its herd. It has become less dependent on international purchases”, explains economist Fernando Henrique Iglesias, an analyst at consulting firm Safras & Mercado.

“In 2020, when swine farming prices reached their peak, there were investments in the sector in Brazil. The issue is that the increase in production capacity did not count on Chinese demand so heated in 2022”, he adds.

Data from an IBGE survey on slaughtering illustrate the context of an increase in production potential.

In the first quarter of this year, hog slaughter reached 13.64 million head in Brazil, up 7.2% over the same period in 2021.

This is the highest amount for the period from January to March since the beginning of the survey’s historical series, in 1997.

“What happens is that China shows signs of recomposing the herd, and domestic consumption in Brazil did not absorb the entire amount of meat”, says analyst Juliana Ferraz, from Cepea (Center for Advanced Studies in Applied Economics).

“Pork is an intermediate option. It is cheaper than beef and a little more expensive than chicken. What often happens is that Brazilians migrate directly from beef to chicken”, adds the researcher, in reference to periods of escalating inflation.

Projection signals higher consumption in 2022

In 2021, the per capita consumption (per person) of pork in the country was estimated at 16.7 kilos by the ABPA (Brazilian Association of Animal Protein).

Faced with the recent drop in prices, the entity bets on a high in 2022. The projection is for consumption to reach this year up to 18 kilos, in a high close to 8%.

“There was a decrease in exports and greater supply in the domestic market. Thus, pork is much more competitive than beef, and is a perfect substitute in terms of revenue. The population is consuming more”, says Ricardo Santin, president of ABPA.

Even with the possible increase until the end of the year, pork should still be far from the demand for chicken. The per capita consumption of chicken was 45.5 kilos in the country in 2021 and, for this year, the ABPA projects stability.

IPCA data indicate that, in 12 months through June, chicken in pieces accumulated inflation of 22.14%. The integer rose 16.18% in the same period.

In the IPCA, chicken is not included in the meat group. It is part of the egg and poultry segment.

“For the consumer, pork prices have gained competitiveness. But Brazilians still do not have the same consumption habit as beef or chicken”, says Iglesias, from Safras & Mercado.

“Pork meat is more present today in sausages, such as ham, bologna, sausage and salami. Noble cuts, such as ham and loin, are still not so popular”, he adds.

According to IPCA data, the lull in inflation comes after price increases during the initial phase of the pandemic. Until June 2021, for example, pork reached a high of 32.65% in 12 months.