Brazil: avian influenza brings down shares of poultry exporters on the stock exchange

By Nayara Figueiredo

The arrival of bird flu in Brazil, even if in places far from commercial farms, already pressures the shares of slaughterhouses that export chicken meat, with investors fearing possible impacts on shipments of the product, according to analysts heard by Valor.

Yesterday, one day after the Ministry of Agriculture declared an animal health emergency in the country due to cases of the disease in migratory birds, Marfrig led Ibovespa’s fall.

The company’s ON shares fell 5.18%.

BRF closed with the third largest decline in the index – the ON shares retreated 4.91%.

The chief strategist of RB Investimentos, Gustavo Cruz, said there is fear in the financial market when the subject involves sanitary problems.

Between February and March, Brazilian beef exports to the Chinese market and other countries were suspended due to an atypical case of the disease “mad cow disease” in Pará.

“Now, when we see this news of the avian flu, which has already caused great damage in other parts of the world, there is a fear,” said Cruz.

“BRF was affected because it is one of the largest global exporters of chicken meat,” said the head of agribusiness at Criteria Investimentos, Rodrigo Brolo.

Marfrig, in turn, was hurt because it is the parent company of BRF, with a 33% stake in the food company.

“JBS moved little (in share prices) because Seara only represents 10% of the group,” added Brolo – Seara is the poultry and pork unit of JBS in Brazil.

The ON shares of JBS also ended the trading session down, but the retreat was more moderate: the fall was 0.93% to R$ 16.98.

Sought, BRF, and JBS declined to comment.

Marfrig did not respond to a request for comment.

According to the Ministry of Agriculture, until last Monday, eight cases of highly pathogenic avian influenza (H5N1) were detected in wild birds.

Seven were in Espírito Santo and one in Rio de Janeiro state.

There are no changes in the Brazilian status of free of the disease before the World Organization for Animal Health (OMSA) because there is no record of the disease affecting commercial production, allowing chicken exports and domestic consumption to continue normally.

Still, the RB Investimentos strategist evaluates that the confirmation of cases in the country makes the market mistrustful.

“It is not worth exposing to a sector whose shares may fall,” he said.

In addition, Cruz pointed out that the next release of the Gross Domestic Product (GDP) for the first quarter should show a positive performance for agribusiness, which draws investors’ attention to other companies in the agricultural sector, which can be alternatives to those who choose to leave the meatpacking plants’ papers.

Rafael Passos, analyst-partner at Ajax Asset, recalled that the health problem occurred precisely at the moment when exports were improving in volume, and the margins of the industries signaled recomposition, benefited by the drop in prices of commodities used in the feed, such as corn and soybean meal.

“It is a pity because, in the last Secex (Secretariat of Foreign Trade) data, we had been observing a growth,” he said.

Data from the Brazilian Association of Animal Protein (ABPA), made based on information from the federal government, showed that chicken exports (fresh and processed) increased 12.1% in the first four months of 2023 in relation to the interval between January and April of last year, with 1.749 million tonnes.

The absence of avian influenza in the country was one factor contributing to foreign sales of chicken meat produced in Brazil to gain market over competitors affected by the disease, which needed mass slaughtering.

For example, the Chinese imports of Brazilian chicken meat grew 33% in the first four months to 262,800 tonnes. Other important markets, such as South Korea, Mexico, and Singapore, also expanded their purchases.

With information from Valor

News Brazil, English news Brazil, Brazilian agribusiness, avian influenza