Corn and soyabean as factors of competitiveness in Brazilian pig production
We must not lose sight of the high added value of pig production, either upstream or downstream. Downstream, in primary production, pig farming leads to great demand for corn and soyabean meal as the feeding of pigs in Brazil is based on the consumption of these ingredients. According to estimates by Embrapa Swine and Poultry, this activity was responsible for 18% of the demand (8.46 million tons) of all the corn consumed in the country in 2007, and also a significant part of soyabean meal (2.21 million tons). Besides the sector supplier of inputs for feed, this chain also influences the sectors of transport, processing and the chemical industry.
Soyabean is an important commodity in the international market. There are no barriers related to health, and protectionist attitudes are low for this product as far as the European Economic Community and Asia are concerned. In the 2006/ 2007-crop year, the world’s soyabean production was 229.4 million tons, of which the most important producing countries were the United States (86.77 million tons), Brazil (57.00 million tons), Argentina (44.00 million tons) and China (16.20 million tons). The world’s largest exporters are Brazil, the United States and Argentina; the biggest importers are China, European Union, Japan, Mexico, Taiwan and Thailand. For many countries there is a positive correlation between the dependence on soyabean and soyabean meal and the production of pigs and poultry. For example, China, the European Union, Japan, Mexico and Thailand are major producers of pigs and are dependent on the import of soyabean complex. Similarly, China, European Union, Mexico, Japan and Thailand are major producers of chickens.
The price of soyabeans in Brazil has a very consistent performance, always linked to the international price, as observed in other studies (Aguiar, 1994) (Figure 4). This explains why producers have confidence in this activity, as they are not hostage to a small group of buyers.
The production of soyabean in Brazil showed significant annual growth of 6.07% over the last 6 years, well above the annual growth of world production, which was 3.78%. In the 2007/2008 crop year the production of soyabean in Brazil occupied an area of 20,686,800 hectares, which was equivalent to 45% of the area planted with annual crops in Brazil in the same period. Because of the availability of soyabean meal in the country and the lack of alternatives, the possibility of replacing this ingredient in animal feed is limited.
World production of corn in 2006 was approximately 692.4 million tons. The largest producers are the United States with 267.5 million tons (40.6% of world production), China with 143 million tons, Brazil with 48 million tons, the European Union with 43.9 million tons and Argentina with 21 million tons. Among the major producers, only the United States has significant exportable surpluses. Brazil is a net importer/exporter on a small scale, while China is taking strides to become a major importer; Argentina has a small exportable surplus.
Exports make up 83.97 million tons. The world’s biggest corn exporters are the United States with 56 million tons, Argentina with 13.5 million tons, Brazil with 5 million tons and China with 4 million tons. Furthermore, the major importers are Japan (16.5 million tons), Republic of Korea (8.8 million tons), Mexico (8.0 million tons), Tunisia (6.5 million tons), Egypt (4.8 million tons), EU-25 (4.5 million tons), Syria (4.5 million tons) and Colombia (3.3 million tons).
Among the largest producers of pigs, the European Union, Japan, Mexico and the Republic of Korea are highly dependent on imported corn. Similarly, the European Union, Mexico and Japan are also major producers of chickens and dependent on imported corn.
While tied to the international price, corn has a variable behavior in the domestic market when compared to the price on the Chicago Stock Exchange (Figure 5), which is one of the factors determining the profitability of primary production of pigs. During the years of deficit in domestic production and low stocks, the domestic market price is higher than the price applied in the international market (in fact it is the price paid in the United States, plus the cost of internalization of production in the local market). The opposite occurs during periods of surplus in production and rising inventories.
Corn production in Brazil has shown an annual growth of around 5.76%, higher than the growth of global production, which was 4.25%. Combining the two seasons in the period, the production of corn in the 2007/2008 agricultural year covers an area of 14,306,700 hectares, which is well below the potential use of 80,000,000 hectares available only in the Cerrado.
In Brazil, the main substitutes for corn in the production of feed for poultry and pigs are the winter cereals, including triguilho, triticale and germinated wheat. However, these products are of low availability, and thus have a low potential of replacing corn on a large scale in animal feed. Because of the importance of diet in the cost of pig production, and the large participation of corn and soyabean meal in the composition of the diets, an important factor for the competitiveness of Brazilian production of pigs is the production of both on national soil.
In Brazil the production of grain is concentrated in the traditional agricultural regions, south and southeast, and has been expanding since the 1980s to the Brazilian Cerrado, located in the Central West, and in some areas of the states of Maranhão, Piauí and Bahia.
The Brazilian Cerrado, besides being huge, is still relatively little explored, which demonstrates the competitive potential of Brazilian pig production in terms of availability of grains.
By Santos Filho, J.I.; Bertol, T.M.
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Source: © CAB International 2010, Pig News and Information 31 (1), 1– 8