Gabriel Zylberlicht
Even if we weren't in times of a pandemic, with Sapucaí and Barra Ondina packed, the newspaper headlines wouldn't be about the parties and revelers. For those who think the year only just started, in 2022 we are going through an international crisis unlike any we've experienced since 1962 and, along with it, we are living through a moment of great instability and unpredictability regarding what exports and imports will look like in the short to medium term.
Unfortunately, we cannot control international tension or how this war will turn out, but understanding how the market behaved in response to the event is crucial for the health and profitability of our businesses, especially during this phase of closing and initiating the first feedlot cycle.
The market's major concern was regarding China's stance on the war between Ukraine and Russia. At the beginning of the month, many believed that China would take territorial expansion as an example, and the possibility of a Taiwan invasion was taken for granted. Facts like this brought a lot of uncertainty regarding meat imports from our main international client. This tension was eased when Chinese President Xi Jinping finally spoke out and, to the surprise of many, showed a certain diplomacy regarding the conflict.
To better understand the impact of a potential ban on beef exports, let’s look at the figures for the end of February. According to data from the Foreign Trade Secretariat (Secex), 159,100 metric tons of beef were exported, generating $889.4 million in revenue—approximately 91,91% more than in February 2021. The country, which at one point accounted for 56% of imports, has been showing a certain appetite for our beef, and it is crucial for cattle ranchers’ profit margins that it continues to be a major buyer of our beef.
Turning to the price behavior of live cattle, February saw relatively stable prices. This was due to the balance between low supply of finished cattle and relatively weak domestic demand for protein, coupled with strong export demand, as noted in the previous paragraph. In the monthly average price comparison, there was an increase of 0.54% compared to the previous month; variations below 1% had not been observed since July 2021.
Thus, to everyone's relief, the way the war is unfolding has not brought major impacts in the short/medium term when we talk about the fat cattle market. Of course, there is great concern regarding fertilizer imports for the next harvest (2023), despite the statement by the Ministry of Agriculture, Livestock and Supply (MAPA) on 03/04 that there are no changes so far in negotiations. What remains for us is to work every day and hopefully await the most peaceful resolution possible of this conflict.