Page 40 - Minerva Foods Sustainability Report 2016

2016 Sustainability Report
Industry overview
In 2016, the performance of the meatpacking industry in the domestic market re ected the economic downswing seen the previous year. Beef consumption continued to be a ected by rates of in ation, increased unemployment and less credit. e combination of these factors reduced the buying power of C, D and E class consumers, causing a drop in domestic demand and causing migration to cheaper cuts and al- ternative proteins, such as chicken, pork and processed foods.
Nevertheless, appreciation of the Brazilian real against the US dollar and signs of recovery in the domestic market over the last months of the year meant that a large part of foreign market produc- tion was distributed within the domestic market. Within this scenario, Brazilian export volumes remained unchanged compared to 2015, totaling 1,077.6 tons. Export revenue totaled US$4,351.0 million, down 7% year-over-year.
e average price of beef in USD fell by 6.3% in 2016, year-over-year; this was the result of a combination of a greater share of exports to countries that demand more front quarter cuts (change in mix) and fewer imports from Ven- ezuela, which sets an average price for beef at above the Brazilian average. Even with appreci- ation of the Brazilian real starting in the second semester, the average price in reais remained at practically the same level compared to 2015, the result of recovery in the international market as of the second half of the year.
roughout 2016, China and Hong Kong were the main destinations for meat exported from Brazil, accounting for 33% of total export revenue, up 10% from the previous year. Egypt accounted for 12% of exports, holding onto its place as the number two destination for exports.
Russia was the third most popular destina- tion for Brazilian exports, with 9% of this to-
tal. From a commercial standpoint, the main change in the export mix was opening of the North American market, which should result in access to new markets. e adverse eco- nomic scenario was also responsible for a drop in total slaughter volume. In 2016, 24 million head of cattle were slaughtered, 3% less than in 2015. Over the last two years, there was a 10.4% reduction in slaughters.
Market outlooks for animal availability are very positive for 2017. Indicators point to higher feedlot cattle volumes year-over-year, as a re- sult of falling replacement and grain prices. e curve of available slaughter-ready animals points to a shi in the cattle cycle in 2017 and, as a consequence, a greater supply for slaughter. In Paraguay, where Minerva Foods maintains operations, 1.9 million head of cattle were slaugh-
38