Brazil always had a natural rural aptitude, and at different periods was a major player in sectors such as sugar and coffee. Only more recently has Brazil started to seriously take off in a range of agribusiness sectors, sometimes moving quickly into the lead position.

That trend has been similar with pig production. However, the recent past has provided some hard lessons. Today, pork producers and integrators are trying to meet challenges with new strategies. Here is a fresh look at the past, present and future of Brazil’s pork sector.

A Bit of History

In 1950, Brazil’s pork production was 329,000 metric tons, according to the United Nations’ Food and Agriculture Organization, a mere 2.1 percent of the world’s production at the time (15.670 million MT). China produced 2.206 million MT or 14.1 percent, and the United States led the world at 4.695 million MT or 30 percent.

Of course, things have changed dramatically. From the 1960s to the 1980s, Brazil, Canada, Japan and Mexico swapped positions many times within the second tier of major producers behind the leaders China, United States, the eventual European Union and the former Soviet Union. By the late 1990s, Brazil had overtaken its direct competitors (as well as Russia) and moved into fourth place among the world’s major producers, where it remains today. 

In 2007, FAO estimated Brazil’s volume at 3.130 million MT, an 850 percent growth from the 1950’s estimate. It also showed a 2.7 percent share of the world’s production, estimated at 114.303 million MT. U.S. production in 2007 reached 9.953 million MT or 8.7 percent of the global production. Meanwhile, China skyrocketed into first place, producing 60 million MT or more than half of the world’s production.

Historically, Brazil’s pork production growth has merely followed population growth and minor gains in per-capita pork consumption. The country’s pork producers met domestic demand, so Brazil had neither imported nor exported pork to any substantial degree.

Things started to change slowly in the mid-1980s. In 1996, a larger change occurred, as Brazil nearly doubled its exports from the previous year (based on USDA data). Between 2000 and 2002, exports grew 270 percent, and Brazil exported about 600,000 MT. That moved it into fourth place among major exporters — behind the EU, United States and Canada — a position it has held.

In the last five years, Brazil has exported between 17.9 percent and 23.1 percent of its total pork production. Customers include more than 70 countries, but about 50 percent (in volume) goes to Russia, with another 20 percent to 30 percent going to Hong Kong and the Ukraine.

Brazil does not (or only minimally) reach Japan, South Korea, Mexico, the United States and the EU. As Fabiano Coser, DVM, technical director, Brazilian Association of Swine Producers (ABCS), points out, 60 percent of the world market is out of Brazil’s reach.

In contrast, Brazil’s broiler and beef sectors, in the last decade or so, have experienced about five-fold and 10-fold export increases, respectively. (See accompanying graph.) Together with limited domestic consumption, it helps explain why the pork sector’s overall growth rate has been smaller than that of poultry and beef.

Challenges of the Recent Past

In recent years, Brazil’s overall production situation has swung forward and backward, but has held mostly steady. Still, with Brazil’s growing optimism for the pork sector, sow numbers increased in the late 1990s and early 2000s. In 2002, the world had excess pork, which led to a global price crisis. Brazil also faced a serious corn crisis, and feed prices rallied, including soy-bran prices. Then the bitter cherry on top of it all, foot-and-mouth disease issues in cattle closed export markets for pork as well. Added together, production dropped 6 percent in 2003 and another 3 percent in 2004. Recovery finally began in 2005 and is continuing.

Again, FMD surfaced on some cattle ranches in the state of Mato Grosso do Sul (and, controversially, in Paraná state as well). Export embargos and barriers from many countries followed once more. Most important to the pork sector, exports to Russia fell nearly 34 percent between 2005 and 2006. The impact was not more serious because exports to some minor players rose during that time. Still, since production was recovering from the previous FMD crisis, the lost export market resulted in an excess of pork placed on the country’s domestic market.

A Snapshot of the Present

Today, industrial systems account for more than 80 percent of Brazil’s pig production, a figure which has been constantly rising at the expense of the subsistence sector. A large percentage of the production is integrated, with 60 percent of the country’s hogs concentrated in the country’s three southernmost states — Rio Grande do Sul, Santa Catarina and Paraná. Combined, this area raises nearly 60 percent of the country’s production.

In recent years, growth has occurred in the West-Central states of Goias, Mato Grosso, and Mato Grosso do Sul. These are regions of cerrado (the Brazilian savanna) and have been the basis for huge grain production growth. Coser believes that this grain development is a positive factor that will favor growth in the region. But he also believes that growth will continue in the south. “In the Centre-West there are some logistic problems, and the main consumer markets are in the country’s south and southeast portion,” he adds.

In terms of major players, three companies stand out — Sadia, Perdigão and Aurora, in that order. With nearly 31.8 million hogs slaughtered commercially in 2007, these three major players account for more than 35 percent, or 11.24 million hogs. The combined volume of the next 20 associates of the Brazilian Pork Industry and Exporter Association (ABIPECS) won’t equal that amount.

Export-wise, the ranking is a bit different and less steep. Perdigão and Sadia are again the major players. Together they comprised 36 percent of Brazil’s 2007 exports, which ABIPECS estimates at 607,000 MT.Alibem, Seara and Aurora follow. Perdigão and Sadia are seen as food giants and have been adopting aggressive growth strategies. Sadia has recently established a plant in Russia and has plans for the Middle East, while Perdigão has acquired the European Plusfood.

The industry claims that up to 85 percent of production is integrated. However, Coser challenges that figure. “It depends on what one considers as integrated,” he notes. “If we take the classical type, with the industry providing nearly everything and the producer coming with the building and labor, I don’t believe it’s that high. But it’s surely more than 65 percent.”

He does point out that when pork production came to the West-Central, the nature of integration changed. “There, the industry met a new kind of producer, who already was a big entrepreneur in the agricultural sector. The production units are much larger than the small/medium properties in the south, and the bargaining power also is stronger. Farmers in the classic production regions are associated in co-ops,” Coser adds. “I do believe that there will not be producers outside the industrial process.”

A New Look at Pork

Brazil’s domestic meat market has many challenges. To start, pork ranks third in Brazilian consumers’ preference. “With per-capita meat consumption at 83 kg annually, pork accounts for 13.5 kg, of which 10 kg are from processed products — sausages, ham, bologna and such,” Coser explains.

Betting on the domestic market but feeling it needed a little push, ABCS launched a campaign, loosely translated to “a new look at swine meat.” “Our consumer study showed that Brazilians prefer the taste of pork but hold some prejudices related to perceived health impacts,” Coser says. The goal is to show that pork can be safely consumed the same as beef. “We also will work on the retail market to present fresh pork cuts similar to beef cuts that consumers already know, and to tackle the inadequate presentation at sales points and the perception of impractical cuts or large ones associated with holidays,” he adds. The campaign will later involve producers and the mass media.

ABCS’ goal is to increase Brazil's domestic per-capita fresh pork consumption by 2 kg in three years which, in a country of 190 million people, means 380,000 MT of additional pork consumed annually. “Every extra kilogram (of fresh pork) represents 100,000 additional sows. If Brazil reaches the target, it will be three years ahead of FAPRI’s projections and eight years ahead of USDA’s,” Coser notes. 

It will serve as a stepping stone. “Expanding the domestic market will provide a firmer and safer foundation upon which Brazil can build its exports efforts and serve as a back-up in case problems pop up again,” he adds.

Peering Into the Future

Future prospects for Brazil’s pork sector vary depending on who you talk to. Food and Agriculture Policy Research Institute projects the country will remain the world's fourth-largest pork producer, going from the current 3 million MT to roughly 4 million MT by 2017. FAPRI does not project gains in Brazil’s per-capita pork consumption but looks for exports to keep growing. It forecasts the country will move into third-place exporter by 2017, with 1.258 million MT of pork exported, and that the EU will drop into the fourth spot.

USDA, however, projects less growth for Brazil both in terms of exports and production. It foresees Brazil remaining the fourth-place producer, reaching only 3.300 million MT by 2018. Export-wise, USDA predicts growth to 975,000 MT as of 2018. Central to USDA’s estimates is the view that import restrictions will continue on Brazilian pork in markets such as Japan and South Korea.

Certainly, Brazilians have their own plans, especially for the export sector. In the international arena, ABIPECS has joined with the Brazilian Trade and Investment Promotion Agency to promote Brazilian pork abroad, with Russia as the main target. According to Pedro de Camargo Neto, ABIPECS president, the goal is to increase those exports from the current 270,000 MT to 325,000 MT by June 2009.

“We also have a long-term objective to open Japan, South Korea and Mexico to Brazilian pork,” de Camargo Neto notes. “This involves closely following the actions of governmental bodies in the sanitary arena and supporting them.”               

He points to the impact on pork from FMD outbreaks in cattle and the ongoing FMD cattle vaccination in many states. “FMD outbreaks in South America have always been associated with cattle, never swine. Our farms and plants are among the world’s best,” de Camargo Neto adds. “We just need a focused, collective sanitary-quality effort through the public services. In parallel comes the work of convincing authorities of those countries that we can guarantee such quality.”

de Camargo Neto sees the sector’s progress moving naturally from less demanding markets, with gains in volume, toward more demanding ones, which have higher returns. Another natural evolution that he sees involves adding value, moving from the current focus on carcasses through to boneless cuts to frozen, fresh cuts to chilled cuts and ready-to-eat dishes. 

If all of that unfolds, then the previous forecasts might fall short. Taking Brazil’s recent history for broilers and beef into account and changes for the pork sector might grow even larger.