JBS’ production capacity has been reduced to 80% and Brazilian ranchers prefer to keep their animals in the corral, rather than bring them to slaughter.
The news that is coming from South America outlines a critical situation, in which the difficulties of the main player in the meat market, JBS, follows on from a slowdown in the entire supply chain.
The holding company controlled by the Batistas that absorbed 25% of cattle raised in Brazil and 50% of those from Mato Grosso, not only paid its suppliers on a 30 day basis but now has stopped paying as it usually did in cash.
It does not look as if JBS ever delayed payments, but the circumstances coupled with rumors that point to the Group's liquidity problems has put breeders and ranchers on edge. That has occurred in the face of the declining price of meat and a slowdown in the market. As a result ranchers prefer to fatten up the cattle and thus keep them out of the supply chain.
This will not only reduce the supply of meat to the end consumer and push up prices but could also reduce the number of hides required by tanners, especially in Brazil where JBS is the biggest tannery grouping.
Brazilian exports have also presented problems. The news that the United States has suspended the import of fresh meat from Brazil and that Canada is also strengthening checks on incoming cargoes from the South American giant.
The Brazilian Government is now trying to increase the number of sanitary inspectors employed by 50% or 1600. The problem is that damage has been done to the image and reputation of the industry and it may take time to restore confidence.
Information courtesy of La Conceria – Translated from Italian by Richard Smith