Brazil cattle market stalls as prices hit record threshold

Brazil's fat cattle market came to a near standstill Oct. 28 as futures prices surpass the 400 reais/arroba threshold, prompting cattle sellers and buyers to hold back from new transactions and leaving the spot market largely inactive.

An arroba, the standard unit used for cattle pricing in Brazil, is equivalent to 15 kilogram of carcass weight.

The price surge, driven in part by sharp increases in calf and feeder cattle costs, is adding pressure to slaughterhouse margins and complicating forward pricing for beef exports, particularly to China, where buying interest has been uncertain, according to a Brazil-based cattle supplier.

Some packers reportedly have cattle scheduled for slaughter at approximately 390 reais/arroba plus a premium. However, after futures prices reached 400 reais/arroba, some sellers chose to pause before committing to additional sales, according to the cattle supplier. Producers with cattle already scheduled for delivery are proceeding with those commitments, while those seeking spot transactions are taking a more cautious approach.

According to the supplier, higher calf and feeder cattle prices are adding further pressure on producer margins, making it harder for market participants to agree on price levels. The price expected for later in the week remained uncertain at the time of the discussion, with greater clarity anticipated further in the week.

China demand

Rising Brazilian cattle prices are also influenced by expectation of a resume in Chinese demand in the near future, according to market participants. For China-destined cattle, some participants indicated levels around 380 reais/arroba plus the China premium in the spot market, while others had not yet provided price indications.

The Boi Gordo price index for cattle delivered at farms in São Paulo state reached 381.40 reais/arroba on Oct. 26, its highest level since records began in 1994, according to data from the Center for Advanced Studies on Applied Economics, or Cepea, at the University of São Paulo.

Broader uncertainty stemming from exchange rate volatility and the domestic political environment is also contributing to the market's wait-and-see tone, market participants said.

Adding to the uncertainty, China's General Administration of Customs, or GACC, suspended imports from Marfrig's Promissão beef plant on Oct. 22, one of the country's key plants, according to GACC's list of foreign establishments authorized to export to China.