Brazil’s Beef Industry Squeezed By Unemployment

Up to 45% of Brazil’s meatpacking plants have been idled as they struggle with rising costs and financially-strapped consumers. The shuttered packing plants are the most in data assessed since 2012, according to Rodrigo Queiroz, an analyst at Sao Paulo-based firm Scot Consultoria, which collects production figures from 13 states.

Bloomberg reports that Brazilian producers are getting squeezed as growing meat exports to China boosts cattle prices. Brazil’s beef packers, however, can't fully pass on the higher costs to Brazilian consumers as the country struggles with near-record unemployment. Data from agricultural agency Conab shows per capita beef consumption in Brazil fell 5% to 64.6 pounds in 2020, its lowest level since 1996.

While the strong Chinese meat demand and weaker Brazilian currency have cushioned the impact for companies allowed to export, about three-quarters of cattle slaughtered in Brazil are still sold in the domestic market, Bloomberg reports. Brazil beef shipments to China rose 33% in March versus a year ago, according to data on the Brazilian Trade Ministry.

The price that slaughterhouses pay for cattle has surged 57% in the past year to over 316 reais ($56), according to Cepea, a research arm of Sao Paulo University. Supply is tight as farmers withhold cows from slaughterhouses, keeping them for breeding after calf prices climbed to a record.

Earlier this month, meat-packer Frigol announced it will shut one facility in Goias state and keep operating only in the plants which can export. Some other companies have given paid time off to employees to offset part of rising operating costs.

“We are seeing Brazilians reducing meat consumption as unemployment rate reaches a record and emergency aid for low-income people was disrupted by the end of last year,” said Scot’s analyst Felipe Fabbri.