Not looking at costs in livestock could be suicide, says consultant – 06/08/2021 – Commodities Shuttle

The arroba de boi remains above R$300 in the São Paulo market, a value 56% higher than a year ago.

The acceleration of cattle prices in the pasture made the São Paulo consumer pay up to 33% more for some beef cuts in 2020, and the pressure on prices continues this year.

In the face of such expressive numbers, how are the cattle raisers’ finances going? Revenue is fat, but it could be hiding serious losses for the most inattentive, according to Luciano Vacari, agribusiness manager and director of Neo Agro Consultoria.

Two of the main weighting indicators in the composition of the sector’s costs have soared, and the exchange ratio is getting more and more complicated, he says.

The value of the arroba, although still high, loses a lot in relation to the evolution of the price of the calf. With an ox of 18 arrobas, the rancher acquired only 1.79 calves at the end of May, the lowest level in the last two decades, a period that encompasses the research by Neo Agro.

The bargaining power of the live cattle, in relation to the calf, had a drop of 10% in the last 12 months, and is well below the levels of the best moments in recent years, when it turned from 2.5 to 3 calves.

Corn is another indicator that starts to worry the sector a lot. In the last 12 months, the value of the live cattle lost 25% in the exchange ratio with the cereal. With an arroba of beef, the farmer buys 3 bags of corn, the worst exchange ratio since 2007. The historical average is 3.72 bags.

Vacari says that, in 2007, the ox was undervalued, and the producer, without income, had difficulties in acquiring inputs. Now, the ox is valued, but the cost of production already compromises the cattle raiser’s income.

“The producer can’t just get carried away with the billing. It’s high and it’s good, but anyone who doesn’t take the bills at the tip of his pencil will have a loss.”

Anyone who doesn’t, especially in confinement, will run a huge risk, he says. Given these costs, price protection tools are needed more than ever, according to the manager.
“Entering a confinement with no defined costs and no price protection will be suicide. What the producer cannot do is remain anesthetized with good revenue.”

Fat ox The arroba rose again this Tuesday (8). It was R$316.7, up 2.6% compared to the previous day’s price. The data are from Cepea (Center for Advanced Studies in Applied Economics).

Corn The sack of cereal remains at high levels, increasing production costs in the animal sector. This Tuesday, it was at R$ 96.6, up 103%, compared to the same period last year. The data are from Cepea.

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