US Beef Market Challenges for Brazilian Meatpackers

Brazilian Meatpackers Grapple with Challenges in the US Market

Brazilian meatpacking giants, JBS and Marfrig, are navigating turbulent waters in the US due to escalating cattle prices and a dwindling supply. This has led to a significant dip in their Q1 profits, overshadowing even the losses from the temporary halt of Brazilian beef exports to China.

JBS reported a net loss of BRL 1.5 billion from January to March, a stark contrast to the BRL 5.14 billion profit in the same timeframe in 2022. Marfrig didn’t fare any better, with its profits diving from BRL 109 million to a loss of BRL 634 million.

Felipe Simonsen Biancalana of Guide Investimentos shed light on the situation, stating, “The shift in the US livestock cycle, leading to reduced supply, has been the primary culprit. This setback has been more detrimental than even the mad cow disease episode that led to a meat embargo in Brazil.”

The self-imposed embargo on Brazilian beef exports to China in February and March, in line with a bilateral agreement, further compounded the challenges.

JBS USA Beef’s adjusted EBITDA for the quarter was a mere R$ 115.8 million, a jaw-dropping 97.2% decline from 2022’s Q1 figures. This downturn rippled through the group’s consolidated adjusted EBITDA, which plummeted by 78.6% to BR$ 2.16 billion. Consequently, the EBITDA margin shrank by 8.6 percentage points, settling at 2.5%.

US inflation didn’t help either, especially for Marfrig’s North American sales. Operating through National Beef, Marfrig saw its revenue slide by 15.5% in Q1, amounting to BR$ 13.4 billion. With cattle prices surging, National Beef’s EBITDA tanked by 78% to BR$ 527 million, resulting in an EBITDA margin of 3.9%.

However, Tim Klein, Marfrig’s North American CEO, remains optimistic about the upcoming quarters, anticipating a 3% to 4% reduction in cattle prices. “July is expected to witness the year’s lowest prices,” he remarked.

Interestingly, Minerva Foods managed to sidestep some of these challenges. Not having a presence in North America, they were more affected by the Chinese embargo. Yet, their Q1 profit was BR$ 114 million, only a slight 0.5% dip from 2022. They leveraged their units in Argentina and Uruguay to cater to the Chinese demand.

What’s your take on the challenges faced by Brazilian meatpackers in the US? Share your thoughts below.

Font: essfeed.com

Neoking foods specialized in: 

Brazilian Beef, Brazilian Chicken, Brazilian Pork, Brazilian Egg, Brazilian Breeders e Brazilian Duck, Brazilian Fish

Argentina Beef, Argentina Chicken, Argentina Pork, Argentina Mutton, Argentina Lamb / Uruguay Lamb, Uruguay mutton

Chile Beef, Chile Chicken / Paraguay Beef, Paraguay Chicken, Paraguay Pork