Chicken exports expected to decline in June due to embargoes following bird flu case in Rio Grande do Sul

In the coming weeks, negotiations between the Brazilian government and those importing countries that have completely blocked imports of Brazilian chicken meat will largely dictate the extent of the negative impacts. The situation is likely to worsen if new cases emerge, but even if it is limited to just this one, we believe that exports will decline at least in the next month.

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We addressed our first perceptions about the case of bird flu on a commercial farm in Brazil in the Radar Agro “Note on the case of bird flu in RS”, which we published on May 20, available by clicking here. To date, there are more than 20 countries with a total embargo on chicken meat from Brazil and some with blockades only for Rio Grande do Sul. Among the most relevant, China, the European Union and the Philippines are closed to the entire country, while the United Arab Emirates, Saudi Arabia and Japan have restricted only the municipality of Montenegro (RS).

The extent of the impact on domestic prices and, consequently, on the sector's margins depends directly on the extent of the total embargo. If no new cases occur, the country may be able to quickly negotiate the regionalization of the blockades, which would mitigate the drop in exports and, consequently, reduce the increase in supply in the domestic market. Even so, it does not seem likely to us that all of this will be resolved in less than a month, which, if it happens, would be a great success.

As a result, we believe that exports in June should weaken reasonably compared to the numbers observed up to the third week of May, and local prices tend to lose support. Given the global situation of only four major chicken meat exporters (Brazil, the United States, the European Union and Thailand) and now none without a history of the disease, it is unlikely that Brazil will suffer significant and lasting reductions in external demand.