PSA will raise global animal protein price by 5.6% by 2020

The African Swine Fever (PSA) is expected to lead to a 5.6% increase in global animal protein prices (bovine, porcine and chicken) by 2020, according to BTG's report, if China's output falls by 16 million tons, as currently expected. In a more severe scenario, where Chinese stocks fall by half, the model projects an 8.7% increase in prices. If the drop in pork supply is 15%, the increase would be 2.7% in prices.

In a detailed report on the Brazilian animal protein sector, signed by Thiago Duarte and Henrique Brustolin, the bank estimates that the increase can go directly to the cash flow of meat companies, especially those with integrated production.

BTG also projected the effect of the estimated change in prices on protein companies. JBS 'forecast for Profits before Interest, Taxes, Depreciation and Amortization (Ebitda) in 2020 increased by 45% to R $ 22.1 billion, and the high prices for swine fever are expected to represent R $ 6, 2 billion; for BRF, the estimate of Ebitda next year rises 13% to R $ 5.3 billion, of which R $ 1.9 billion would be coming from swine fever; for Marfrig, the Ebitda projection increased 43% to R $ 4.6 billion, with African swine fever accounting for R $ 880 million.

The bank has maintained JBS as the industry's top purchase recommendation; BRF continues with neutral recommendation; and the recommendation to Marfrig fell to neutral after results considered bad in the first quarter. The projection did not incorporate the effects of the possible merger between BRF and Marfrig, noting that although the trend is in agreement, the deal may not happen. In addition, the bank reiterated that it sees the possible trading with skepticism.

"We chose to wait until we had more details about the potential for synergy," the report said.

According to the report, it is possible that China is not yet reporting all plague cases to try to "prevent the negative implications in the political and economic areas."

The consensus estimate is that the supply of Chinese pigs will fall by 30%, but more alarming analysts speak up by 50%.

It is expected that the demand and prices of beef will also be as benefited as those of the chicken in the process of replacing proteins by the Chinese.

Posted by: Marina Carvejani
Author: Suínocultura Industrial
Source: Agrolink