Brazil Confident to Strengthen Leadership in World’s Meat Market

Brazil's JBSWhile meat and chicken exports from Brazil are recovering at a slower pace than anticipated, Brazilian representatives from the industry and market analysts anticipate that overseas sales should retake pre-crisis levels by the end of 2010, if not in price, in volume.

Nevertheless the industry and experts point out that the strength of the Brazilian currency vis-à-vis the US dollar could cause some problems and slow a more significant recovery.

But in spite of a “cheap” dollar the Brazilian food industry is confident that it won’t be sufficient to affect competitiveness and displace the country as the world’s leading exporter of chicken and beef.

“The availability of natural resources to expand agriculture and the low costs of this activity in Brazil help sustain the competitiveness of the country’s meat industry”, according to João Roberto Farias, a meat market analyst who added that with a more favorable exchange rate for exporters, “the performance of the industry could further improve with a higher profit margin”.

However experts indicate that the problem is not so much the “flat US dollar” but rather its volatility. “From the moment the exchange rate stabilizes, even at a low rate, farmers and industry can rapidly adapt to the new production parameters”.

“During most of 2007 and 2008 we had an exchange rate very close to the current position, but the problem begins when US dollar movements occur too fast,” according to BRF-Brazil-Foods Financial and Investors Relations director Leopoldo Saboya.

He admits that the current exchange rate could have left US chicken exporters in a more competitive position.

But that does not mean the US will bite into a significant world market share of Brazil: “they are not focused for that”, said Julio Cardoso, president of Sadia, one of Brazil’s major food industry corporations.

Brazil currently holds 41% of the world’s chicken market and the US, 37%.

Meantime JBS Friboi, another of Brazil’s corporations in the food industry major league announced that it had successfully concluded the acquisition of 64% of Pilgrim’s Pride Corporation, one of United States main chicken meat processors.

The operation involved US$ 800 million and for this purpose JBS issued debentures totaling US$ 2 billion with the support from the Brazilian government Development Bank.

JBS also announced that shareholders had approved the incorporation to the group of Bertin and JBS Couros, both companies related to meats production.

“These operations are part of JBS diversification and expansion strategy, with the purpose of consolidating the company as a world leader in the animal protein industry and reaffirming its position in Brazil, a highly competitive and globalized market,” according to the corporation release to the São Paulo stock exchange.



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