SAO PAULO, April 12 (Reuters) – Brazilian beef packers have halted production at certain locations, as rising costs that cannot be passed on to consumer prices have squeezed margins, industry sources and representatives told Reuters.
Several small, medium and large production facilities have experienced outages or remain unemployed as they match supply to demand, said Paulo Mustefaga, president of the Abrafigo trading group, without providing additional details.
“The price of cattle has increased by about 60% over the year and the industry has been able to pass 40% of the cost well,” said Mustefaga. “This sector is having difficulty making ends meet.”
The 15-kilogram Arroba, Brazil’s benchmark for cattle prices, hit a historic high of 320 reais ($ 55.95) in recent days, driven by low animal supplies and heating demand for Brazilian beef exports, especially from China.
Mustefaga said another factor forcing companies to cut back on slaughter is the decline in the purchasing power of Brazilian families, as the coronavirus pandemic is slowing down Brazil’s already sluggish economic activity.
Brazil’s second-largest meat processor Marfrig, which owns National Beef in the United States, confirmed to Reuters it was sending employees on leave at a unit in the city of Alegrete for 30 days. The slaughtering there resumed on April 1.
The company also said it was temporarily suspending a plant in Rondonia state.
Minerva Foods, South America’s biggest beef exporter, suspended the Mato Grosso state facility and has not set a time to return, sources close to the company said on condition of anonymity.
Last month, Minerva shut down a factory in the state of Sao Paulo for 20 days, but production has now resumed.
Minerva declined to comment. ($ 1 = 5,7193 reais) (Reporting by Nayara Figueiredo Written by Ana Mano Editing by Marguerita Choy)