Brazil holds poultry export crown despite slumping economy

Brazil holds poultry export crown despite slumping economy

Its economy, its currency and many of its commodity products may be tanking, but the decline has yet to ruffle the feathers of one of Brazil’s largest exports: chicken.

Yet routing from the world’s largest poultry exporter is undergoing fundamental change, with the southern port of Paranagua usurping the role of Chicken Export Capital of the World from rival Itajai — a mere 65 miles away — over the last 12 months.

It’s perhaps inevitable that Brazil, which exported 4.3 million tons of chicken meat to more than 40 countries in 2015, should host the world’s largest port for chicken handling. But in Paranagua, a single terminal, TCP, handles all the containers in the port — approximately 120,000 20-foot-equivalent units last year, up about 15 percent.

In Itajai, two facilities handle refrigerated chicken containers: Portonave, which handled 66,720 TEUs of white meat last year, up from 56,954 TEUs in 2014; and APM Terminals Itajai, which moved 40,660 TEUs. Itajai also has nine refrigerated warehouses, the biggest of which, Brasfrigo, has capacity for 42,000 metric tons.

Paranagua, by contrast, has a single 17,000-metric-ton-capacity cold storage warehouse operated by Martini Meat. The two biggest chicken shippers using Martini are JBS Group, the world’s largest chicken producer; and BRF, or Brazil Foods, the world’s second-largest chicken producer, which was formed by the merger of Perdigao and Sadia. JBS and BRF also are significant customers at Paranagua and Itajai.

In a country where iron ore and other major commodity exports are slumping, chicken is taking on greater importance, delivering $7.2 billion of revenue to the Brazilian government in 2015, though that was down 11 percent, according to Ricardo Santin, executive director of the Brazilian Association for Animal Protein.

The decline in the value of the currency, the real, has helped boost demand for Brazilian chicken in several international markets, he added, noting the competition among southern ports, where some 90 percent of slaughterhouses are located, is a positive sign for the industry.

“For us at ABPA, we do not mind if it is Portonave/APMT and Itajai or if it is Paranagua and TCP. It is just important that the chicken is shipped,” said Santin, who also is vice president of the International Poultry Association. “I would say that (the state of) Parana today has more slaughterhouses and companies than in the past and has become a very strong hub for exporters.”

Japan now is Brazil’s largest chicken customer, importing 880,000 metric tons in 2015 and overcoming No. 2 Saudi Arabia’s 770,000 tons.

Two major clusters of slaughterhouses are located around Cascavel, in the far west of Parana, close to the Argentina border, and near Londrina, in the north center of the state. Their growth in recent years has allowed Parana to increase its percentage of chicken exports from 26.8 percent in 2008 to 32.2 percent today.

There are various reasons for the development of Itajai and Paranagua as chicken export hubs, but the key strengths are the proliferation of chicken producers in Parana and the neighbouring states of Santa Catarina and Rio Grande do Sul, along with the concentration of reefer warehouses in and around the ports.

The main reason Itajai has ceded its top spot to Paranagua is related to the weather, according to Robert Grantham, director for Santa Catarina, Brazil-based ShipConsult. The El Nino phenomenon has brought heavy rainfall, which in turn caused major siltation at Itajai and the loss of draft for container ships. Delays in emergency funding from the central government exacerbated the problem, he said.

Itajai also is awaiting the expansion of its turning basin, which could be a game changer because it would allow the maximum length of ships to increase from 303 meters to 335 and vessel container capacity to expand from about 5,000 TEUs today to 10,000 TEUs, and possibly larger, depending on load factors and the tide.

“Itajai has a fantastic array of reefer facilities and good transport links, but its success in the chicken sector has been fading because of the lack of draft over the past year,” said Grantham, who was the commercial director for the Itajai Port Authority from 2009 to 2012 and has been immersed in the logistics of the chicken industry since. “Hopefully, that will turn around at some point.”

The Itajai port complex, which includes APMT and Portonave, hosts nine large reefer warehouse facilities that offer huge storage capacity. Two are on the quayside, with the rest on the outskirts of town near two main highways. Another refrigerated warehouse, the 15,860-metric-ton-capacity Iceport, is located at Portonave, in nearby Navegantes. In all, Itajai has more than 8,000 reefer plugs and more than 155,000 metric tons of refrigerated warehousing capacity.

It was quite an achievement for a small port town like Itajai, with a population of 185,000, to become the world’s largest chicken export hub. It’s an even greater achievement for an even smaller town — Paranagua has a population of only 135,000 — in one of Brazil’s smallest states, Parana, to have a port that today rules the world in terms of poultry exports. So how did Paranagua and TCP become so prominent?

TCP’s chicken throughput increased from 91,000 TEUs in 2012 to 120,000 TEUs last year, up 15 percent over 2014. Another 8 percent increase is expected this year, according to TCP.

TCP CEO Luiz Antonio Alves agreed with Grantham that draft was an important factor in Paranagua’s recent ascendency, but the key factor is a rail network that connects the container terminal to two terminals in the interior of Parana. “Last year, we hit record highs (in refrigerated exports) month after month. What changed everything over the past few years has been the setting up of an efficient rail link into the heart of our terminal,” he said. “This makes such a big difference for our clients, as it reduces their inland transport costs by around 30 percent. None of our rivals have freight trains coming directly into their terminals.”

The number of containers arriving by train at TCP has soared from 500 TEUs in 2012 to 12,000 in 2015, he said. “Around 70 percent of the 2015 figure is reefer cargo, and 95 percent of that is chicken,” Alves added.

BRF and JBS Group, he said, dominate the Parana market, but other companies, including the Cotriguaçu Consortium and Marfrig, also are strong. These companies feed the Parana container freight stations from Parana, but the rail terminals also are drawing containers from farther afield, including the interior states of Mato Grosso, Mato Grosso do Sul and Minas Gerais, as well as the interior of Sao Paulo state. Shippers from these states transfer their chicken to rail at Cambe, near Londrina, for quick and cheap dispatch to the TCP terminal. Approximately two-thirds of the chicken already is stuffed into containers and just under a third goes to Martini Meat for consolidation and packing.

To bring about this sea change in inland transport — from truck to train — TCP invested $12 million on its rail terminal in Paranagua, duplicating its rail track and handling equipment, and set up a joint venture with Brazilian logistics provider Brado.

The terminal has 2,800 reefer plugs, the highest concentration of plugs in any South American port, TCP said. The number of plugs will rise to 3,200 this year to meet growing demand.

Another big factor in Paranagua overtaking Itajai is the proliferation of deep-sea services from TCP to all the main export markets. As a standalone terminal, TCP has more weekly calls — 15 — than any other South American terminal, Alves said, chiefly because the continent’s largest port, Santos, splits its services among six container terminals.

“We have the 20 largest carriers in the world calling here with 15 weekly services, with many of them calling both northbound and southbound,” Alves said. “This gives us an advantage over the other southern ports when it comes to chicken exports. It is an important factor that separates us from the other southern ports and gives more options for the exporters to export to their markets all around the world.” 

Contact Rob Ward at rcward788@btinternet.com.