Meat prices rise again in Brazil

After signs of a truce, meat prices rose again for Brazilian consumers between the end of 2021 and the beginning of 2022, according to data from the IPCA-15 (National Index of Broad Consumer Prices 15).

According to the inflation indicator, products had highs in December and January of 0.90% and 1.15%, respectively.

The IPCA-15 is calculated by the IBGE (Brazilian Institute of Geography and Statistics) between the second part of the previous month and the first half of the reference month of the disclosure. For the January index, for example, data were collected between December 14, 2021 and January 13, 2022.

The last two increases in meat came after two falls in October and November (-0.31% and -1.15%). These two reductions had interrupted a 16-month sequence of highs, verified between June 2020 and September 2021.

In the IPCA-15, meat prices reflect the variation of 18 cuts, mostly beef, in addition to pork and mutton.

For analysts, the increases between the end of 2021 and the beginning of 2022 reflect a combination of factors. In part, there are seasonal effects, because demand in the domestic market is usually heated with the holiday season.

In addition, there are also reflections of the end of the embargo on Brazilian beef exports. to China, announced on December 15th. The measure was in effect since the beginning of September, after the registration of two atypical cases of mad cow.

It was precisely the embargo that, according to analysts, had made prices give signs of a truce for the Brazilian consumer, since the offer of products was more concentrated in the domestic market before the end-of-year festivities.

With the end of the restriction, the scenario begins to change, and the greater demand from the Asian country puts pressure on prices in Brazil.

“The embargo was something unexpected. As there was no longer any output of beef to China, the offer was greater here, relieving the consumer. At this moment, with the end of the embargo, prices have been rising”, points out economist Matheus Peçanha, from FGV Ibre (Brazilian Institute of Economics of Fundação Getulio Vargas).

Pressures in 2022

At the beginning of 2022, the level of beef should remain high for Brazilians, forecast analysts.

New pressures from Chinese demand for the products are not ruled out. In January, Brazilian beef exports advanced 31% year-on-year, with the impact of business to the Asian country.

Another issue on the radar of analysts is the drought in the southern region, which punished crops such as corn, soybeans and pastures. Water scarcity makes it difficult for livestock to feed.

On the other hand, what can stop the increases for the consumer is the fact that a large part of the population has a lower income, ponder analysts.

In the quarter up to November 2021, the most recent period with available data, average labor income fell again in Brazil, reaching the lowest level since 2012, according to the IBGE.

The tighter budget hurts household consumption and threatens demand for various items, including animal protein. Thus, in theory, it is more difficult to pass it on to final prices, say analysts.

“It may even be that prices rise more at the beginning of the year. But we don’t have as much room for an increase, or a decrease, at this moment. I would talk about price stability at a high level”, evaluates agribusiness specialist César Castro, from Itaú BBA.

In the 12-month period up to January, meats rose 9.95% in Brazil, indicates the IPCA-15. In June 2021, the accumulated reached 35.76%.

That is, there was a deceleration in prices, but inflation is still close to double digits. In general terms, the IPCA-15 accumulated a high of 10.20% until January.

“With low incomes and higher inflation, everything is relatively expensive for the consumer”, says Antônio da Luz, chief economist at Farsul (Federation of Agriculture of the State of Rio Grande do Sul).

“We have seen food become more expensive, as well as other products. Beef is not an island. It is in this context”, he adds.

With the lack of rain that hits the South and the difficulty to feed the cattle, producers in the region may choose to sell part of the animals before, in an attempt to avoid greater losses, according to Luz.

This, says the economist, may reduce supply further ahead, putting pressure on final meat prices.

By punishing crops such as corn and soybeans, the drought in the South also impacts production costs in sectors such as chicken. It is because the plantations provide the inputs for the poultry feed.

Until January, the group of birds and eggs accumulated inflation of 22.13%, according to the IPCA-15. In November 2021, the accumulated reached 28.25%.