Burdened oil nations seek cheaper Brazil chicken

Major oil-producing countries, which are among the top buyers of Brazil’s chicken, aim to pay less for it from 2009, a Brazilian poultry industry source said on Nov. 6, to cut spending after crude prices halved.

Buyers have not cancelled any contracts, said the head of the Brazilian Association of Chicken Producers and Exporters, Francisco Turra, but he sees a tough negotiations ahead for next year’s contract terms.

“Exporters have said many importers are trying to reduce prices due to the falling oil prices,” Turra told Reuters.

Saudi Arabia, United Arab Emirates, Qatar, Iraq, Venezuela and Russia are among Brazil’s top poultry importers. The South American country is the world’s largest exporter of the product, with about 40 per cent of the global market.

Oil prices are currently at around $60 per barrel, down sharply from the record of $147.27 in July due to global recession fears resulting from the financial crisis.

Brazilian poultry prices also hit record levels this year. The average price between January and September was about $1,800 per tonne, compared with $1,359 per tonne for the same period in 2007.

Brazilian exports totalled 2.66 million tonnes this year through October, up from 2.3 million tonnes a year earlier. Saudi Arabia bought 285,000 tonnes of this, followed by Venezuela which bought 253,000 tonnes and United Arab Emirates which purchased 162,000 tonnes.

“There has been no cancellation … we’re talking about the first quarter of 2009. This year’s contracts are being respected,” Turra said.

To meet strong local and external demand, Brazilian producers raised poultry output this year by 20 per cent from 2007, and the country is likely to nab China’s ranking of the world’s No. 2 producer after the United States.

With sales waning, the industry is now expected to cut production by 10 per cent to 15 per cent in the first quarter of 2009, Turra said, adding companies would not accept price cuts.

He said poultry exporters were in turn dealing with a lack of credit, as trade finance lines have grown scarce and expensive in the wake of the global financial meltdown.

The only positive aspect of the crisis has been the drop in Brazilian corn exports, which should make it easier and cheaper for chicken producers to source supplies locally, Turra said.

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