In dialogue with Added Value , from Radio Carve, the Uruguayan broker, Daniel Castiglioni , based in China, analyzed that “we have good operations in China. Beginning of March, after the New Year, we have an unusual activity, with a strong market movement, with many operators buying, the pace did not slow down, operations were agile, which caused the price of meat to rise”. This, he assured, the Chinese are concerned about the price level, “which means that in recent weeks they have made a standstill because the prices seem crazy to them.”
The broker estimated that there were increases, since March, around 10 or 15% in three weeks, which is a lot for that period.
When asked how Russia affects the invasion of Ukraine, he considered that at the moment not much has been said about the subject, “the Chinese are not so concerned about the fact, for the most part. There is a minority that has tried to cover themselves and secure supplies just in case.”
He analyzed that the main threat is oil and the increase in freight costs. And also the exchange rates in the world that can be volatile and affect the economies of any country.
Then he analyzed that the rises in values respond basically to the lack of meat and to the great demand from China, which has continued to buy non-stop in the last 7 months. “Which means that all the refrigeration plants in the world are sold out one or two months ahead of today. Somehow they need to stock up to meet that demand.”
He said that the increase in the price of cattle in producing countries directly affects prices. “The Chinese are price takers, but up to a certain level.” He added that “the Chinese are concerned about continuing to take a position on today’s values. This week there was a drop in purchases to wait for what happens, because domestic prices are not consistent with export prices.”
Today there is a difference of almost 400 dollars per ton in what a product is worth in the Chinese market compared to buying it abroad. “There is always a replacement difference, but never that high. And many speculate that as of this week they could start to lower prices.”
According to Castiglioni, with this level of farm prices today, with the situation of meat supply in Brazil and Argentina with restrictions due to how Australia is today, there is not much room for a drop in values. “Perhaps a margin for the decline, of 200 or 300 dollars a ton. It can’t go much lower because there’s no meat available either. It is a global reality. Whoever wants beef will have to pay for it somehow. Perhaps not at these prices today, but with values that will not be much lower”.
He estimated that “there may be a drop, but it will not be significant because there is no volume of meat. And entering winter there will be more shortages, and with the refrigeration plants sold until April or May.”
He also stated that this year, we must look at what happens to pork, because it can be an alternative to beef, although this will always be a priority. “But if it shoots up a lot and pork prices, which have had a price drop in the world, it could be a threat.”
Although he recognized that everything can be altered with the valorization of the grains resulting from the conflict in Russia and Ukraine. “You have to see that Russia and Ukraine are important suppliers of grains for Europe and for China, this will make the raw materials appreciate and will also make the price of pork more expensive.”
Source: El País newspaper