Despite the market’s upward trend at the end of the month following the authorization of new plants to export meat to the Indonesian market (Jan. 17), the CEPEA/B3 index closed the month with an average of R$285.97/@, a decrease of 2.10%MoM (compared to the previous month) and 15.51%YoY (compared to the same period last year).
Despite this news, which temporarily pushed the indicator up to a valuation of 7.50 reais/@, the market calmed down, but continued with a relatively steady upward movement until the end of the month.
The replacement market apparently followed the same movement as the fat cattle market, as shown in the chart below.
The Esalq Index closed the month with an average of R$ 2,395.32 per calf and R$ 11.88 per kg, down 1.10%MoM and 17.61%YoY.
Thus, when we combine the two pieces of information above, cattle ranchers saw their purchasing power decline by 1.01% in January due to the steeper decline in the price of fattened cattle compared to calves, as shown in the chart and table below.
We are all very aware that the livestock scenario in 2023 is very difficult. Even with the rebound of fat cattle now at the end of January and beginning of February, these animals that are getting ready for slaughter now were purchased during a period of high prices in the replacement market, making the inventory more expensive. Therefore, when we analyze meat production punctually, the turnover should result in extremely tight or even negative margins.
There’s a saying that goes, “Life is very sad when viewed up close, but very happy when viewed from a distance.” But what does this saying have to do with livestock farming? If we analyze animal production on a day-to-day basis, 99% of the time we’ll be certain that it isn’t a profitable activity, but if we look at the big picture—from the perspective of a complete livestock production cycle—production is extremely attractive. Thus, the current situation we’re facing should be viewed as a great opportunity for livestock producers to produce meat with the highest possible productivity, aiming to generate some margin for the short term and, above all, to increase their purchasing power, since these animals—which are inexpensive to purchase now—will yield healthy margins when they go to slaughter at the end of the cycle.