2013 promised well but isn't performing

After remaining reasonably firm for the critical first two months of the year, prices are declining again, and have fallen about 10 per cent across the country. They are now down to about US$1.43 per kg live weight (64.41¢ USD/lb.) for market hogs in the southern state of Rio Grande do Sul.

Of course, we have the usual explanations from industry players of people eating less meat during the Lenten period. It’s interesting how there are always explanations for price drops.

Part of the explanation is to be found in exports. In March, exports fell in volume by 19.5 per cent year over year, and by 5.5 per cent compared to February. The equivalent figures for value were 13.7 per cent and 4 per cent.

To ease the pains of producers, the prices of corn and soy meal have also fallen slightly over the last month, by about 10 per cent in both cases. However, feed costs are not the only costs, and other costs continue increasing.

Brazil is not an easy country for businessmen. Taxes are excessive (taking about 36 per cent of GDP) and the services offered to citizens in return are of extremely low quality, to the point where most citizens who can afford it have private health plans, send their kids to private schools and employ security guards to try to keep their houses safe.

The national infrastructure is in a deplorable state. Farmers who export soya beans face a cost of around US$120 per metric ton to get their product to the port, something like 4-5 times the cost of their counterparts in North America. With the soya harvest in full flow, truckers face lines of up to 15 miles to unload at the port. This all becomes cost to the producer. Some weeks ago, China cancelled an order for soya beans equivalent to 5 per cent of annual exports, due to the delay in loading ships.

The labor laws, copied from Mussolini in 1943, are another source of a kind of Russian roulette. No matter what precautions an employer takes, he is subject to heavy penalties if an employee takes him to the labor court. Yes, we have an enormous judicial system just for labor actions which, in 2011, transferred US$7 billion from employers to employees.

A recent decision by the Supreme Labor Court means that workers in cold stores in meat plants must spend 10 minutes of each hour in a VIP lounge to recuperate from the trauma of working. This is to preserve the “dignity of the human person”, guaranteed by the Federal Constitution of 1998.
The production manager of our local hog plant explained that, as it will take 10 minutes to transfer workers to the VIP lounge and another 10 to get them back to work, they will, as of now, actually work 30 minutes per hour. This obviously increases the cost of producing pork, making Brazil less competitive on the international market and increasing the cost of living for nationals.

But Brazilians are the eternal optimists! We have the World Football Cup coming up next year, and it now seems that some of the new stadiums might actually be ready in time. And two years later, in 2016, the Olympic Games will be held in Brazil, theoretically bringing all sorts of lasting benefits to the country. Brazil, the eternal country of the future...