This improvement is attributed to the end-of-year market, as consumption of pork tends to rise with the Christmas and New Year holiday season. Pork plants start stocking product in October to satisfy higher demand from supermarkets in December.

There is also a monthly price cycle in Brazil, generated by the fact that most Brazilian workers in formal employment receive their salary on a monthly basis, legally due by the fifth business day of each month. As the majority of these workers live on a tight budget, they tend to splash out on meat when the pay check rolls in.

So the first two weekends of November were seen as the testing time, with the monthly and yearly factors coinciding. Pork prices should have jumped over these 10 days, and nothing happened!

But over the last week there are indications that something is moving. The price of beef on the hoof is high just now, and this is always supportive of pork prices, as consumers try to reduce total meat outlay by buying more pork. Increases of around 5 per cent have been seen in pig prices this week, maybe indicating that the seasonal effect is finally being felt. Better late than never!

Pork to China

Pig producers have learned to live on hope rather than margin, and one of the surviving hopes in Brazil is that new export markets will open up, strengthening demand and thereby increasing prices. There is a list of countries to which Brazil hopes to start exporting, and the most important one, in terms of potential volume, is China.

News over the last week suggests that exports to China are about to become a reality. The Marfrig Group announced a week ago that it will make the first shipment to China on 24 November (today!). The shipment will include hams, shoulders, belly and neck and is heading for Shanghai. Until now, China has imported only beef and chicken from Brazil but, since 2008, is the largest importer of Brazilian agricultural products, having increased its purchases by 214 per cent over three years, from US$3.5 billion to US$11 billion.

Then came the announcement that the Aurora Cooperative, in Santa Catarina, would become the second pork processor to export to China, with a shipment of 10,000 tonnes in January. This figure impresses – with average Brazilian exports of around 50,000 tonnes per month, this new importing country will take an extra 20 per cent on total exports, from just one company! Perhaps China will be the (short-term) savior of Brazilian producers…

Aurora declares it is optimistic that the export markets of Japan and Korea will also open soon. Who knows, perhaps 2012 will be the year of the Brazilian pig producer! This would be a great relief for those that are still in business.

David (without the sling) and Goliath

The VLIs (Very Large Integrators) are taking over pig production in southern Brazil. This trend has been strong over the last decade and is now almost complete. It is reckoned that contracted production accounts for some 85 per cent of total production.

The relationship between the contracted producer and the integrator is rather like David and Goliath, but this David doesn’t have a sling! Every pig farmer in the region knows of cases where two or three producers got together to try to negotiate a better deal with the integrator, and suddenly found a week later that they were no longer under contract. And the integrators play the contract as they like, changing formulas used to calculate remuneration unilaterally at will, and also simply ignoring contract terms such as the payment period, pushing it forward as their cash flow dictates.

Two projects for new laws that may soon put an end to this abuse are currently under analysis in Congress, promoted by the Brazilian Pig Producer Association (ABCS). It is likely that they will be united into one project. The new law would regulate contractual relations between integrators and contracted producers of pigs, chickens and some other livestock, such as turkeys.

The projects include ideas such as:

• contract duration the same as the term of the bank loan raised by the producer for investment in installations
• an arbitration commission to deal with complaints while protecting the producer from retaliation
• total transparency in all contract terms, such as the formulae used for calculating remuneration
• sharing costs of environmental control measures which are currently borne solely by the producer

As it seems likely that the vast majority of producers in Brazil will work under contract in the not very distant future, this new law is vital to prevent exploitation. Today, once a producer works under contract, he becomes totally dependent, his options are reduced to one and he has to accept what comes if he wants to continue producing. With a well-designed law to bring some equity back into the relationship, his prospects would improve considerably.