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INSIGHT: Improved Outlook for Animal Nutrition Firms in Brazil

29 January 2019 – The CEO of the Brazilian Feed Industry Association (Sindirações), Ariovaldo Zani recently predicted that 2019 will be a slightly better year for the Brazilian feed producers, in part due to the new Jair Bolsonaro government and its plans to create jobs. It is also expected that a bumper crop harvest will reduce feed costs for farmers and give a positive boost to the animal protein production chain. Zani predicted a 3% increase in animal feed production this year in Brazil.

The Brazil meat scandal and the long truckers’ strike had obvious negative consequences on the market. But other factors to keep an eye on would be global trade barriers, the influence of the US or China and any postponement of domestic structural reforms – all of which could possibly slow down the growth in Brazilian agriculture and in the feed sector in general.

According to Andy Duff, Head of RaboResearch F&A – South America, “The gradual recovery of Brazil’s economy in 2019 is expected to boost local demand across a range of key agribusiness sectors, including corn, cotton, beef, poultry, and dairy. Meanwhile, for soybeans, sugar, and poultry, among others, trade-related issues will be decisive for the local sector’s performance.”

Late last week, enzyme and probiotic supplier Novozymes singled out Brazil and Latin America in general as its most challenging market for feed industry sales in 2018, which was confirmed by pressure on volume sales throughout the year.

Tina Fano, Executive Vice President-Agriculture & Bioenergy at Novozymes, pointed out that in addition to soy prices and competitive moves, the market was still subject to the effects of the vitamin price spikes of 2017-2018. According to Fano, this has meant something for how much feed producers have had to invest or have had money or ability to invest.

Feedinfo News Service asked animal nutrition market leaders with strong presence in Brazil what they think about the situation in Brazil and what can we next expect in terms of challenges and opportunities.

Companies like Cargill Animal Nutrition and Evonik are in agreement with the forecasts.

“Generally speaking, Sindirações has a very structured and accurate forecast regarding Brazilian feed industry trends. Now that the Brazilian government is more aligned with the agribusiness and feed industry standards, the feed industry has more confidence to accelerate its investments,” Cargill Animal Nutrition said. “Additionally, we expect to have a more robust crop. Overall in Brazil, we have a positive outlook for 2019, particularly for agribusiness.”

Evonik added: “In 2018, the Brazilian economy was affected by the last recession. In addition, the truck drivers’ strike impacted several segments of the industry. This includes agriculture and animal production which were severely affected because of disruption in the production and supply chain.”

The 2019 picture, however, will likely be more favorable to feed additive demand, feed demand and animal protein demand in general.

As Cargill Animal Nutrition put it, “the entire Brazilian feed industry is working to help Brazilian producers meet consumer expectations, and we expect this will have benefits for the Brazilian animal protein production chain as a whole—as well as for consumers.”

Evonik sees positive market sentiment thanks to the liberal initiatives announced recently, placing reforms high on the agenda, supporting economic growth and paving the way for additional investments in Brazil.

“Based on the outlook provided by several institutes, Brazilian GDP is expected to grow between 2.2% and 2.5% in 2019. For 2020, GDP growth is expected to be in the 3% range. Since the feed additives market has consistently grown more than the country GDP, we expect this to continue in 2019 and beyond,” Evonik commented.

Asked if expansion plans are in place for their Brazilian operations in 2019, the companies nodded.

“Our business in Brazil is coming off a great year in 2018, and we’re confident we’ll grow in 2019 as well. We’re continuing to invest in our production footprint so we can be more centrally located to serve our customers. This is particularly the case for our products for pasture-raised beef, a sector in which we intend to be a more relevant player in the Brazilian marketplace,” said Cargill Animal Nutrition. “We’re also bringing new offerings to market to strengthen what we offer in terms of animal nutrition capabilities, including launching digital innovations and offering new, natural feed additives to meet consumer demand for reducing antibiotic use in animal production.”

Evonik Animal Nutrition, meanwhile, said it will expand efforts in the field of sustainable and healthy animal nutrition. Its probiotic Ecobiol, for instance, was launched in the Brazilian gut health product market last year.

“To accompany the growth of the Brazilian feed market, Evonik Animal Nutrition will meet customer demand on amino acids through a gradual increase in capacity of our Brazilian lysine production unit in Castro driven by implementing continuous structural process improvements and optimizing operational performance,” Evonik added. “Needless to mention that we will further invest in handling and dosing solutions together with customers to support a robust and reliable supply of amino acids.”

By |2019-02-04T08:23:24+00:00February 4th, 2019|