(Bloomberg) -- Higher cattle prices are here to stay in Brazil even if ranchers bring more animals to market in the first quarter of 2025, according to the head of one of South America’s top meatpackers.
“I don’t think we are going to return to the very low prices of the past,” Jair de Lima, chairman and founder of Frigorifico Concepcion SA, said in a video interview from the company’s headquarters in Asuncion, Paraguay.
That means little relief in the near future for meat producers such as JBS SA who have been wrestling with higher prices for cattle, or for budget-conscious consumers who have given up on steaks in favor of chicken.
Up until recently, meat companies benefited from cheap and abundant cattle in Brazil, where Frigorifico Concepcion operates seven beef plants. But cattle prices surged more than 50% since May after a severe drought damaged pastures and forced meatpackers to pay up for limited supplies of slaughter-weight animals. While beef and cattle prices typically rise late in the year, meatpackers are facing the biggest seasonal increase in cattle costs since the late 1990s.
Brazilian ranchers have culled more and more cows over the past couple of years after prices fell from 2022’s highs, setting the stage for a longer-term decline in cattle availability starting in 2025. Beef output is expected to slide next year, further constraining global supplies at a time when the top producer US is faced with a severe shortage of slaughter-weight cattle.
Falling beef production in China, the US and the European Union will underpin higher international prices into 2025, according to Renan de Lima, a Frigorifico Concepcion director and Jair’s son. The family owns 99% of the company.
The US is importing more beef with its cattle herd at a seven-decade low due to droughts, surging feed costs and high interest rates. The US became Paraguay’s No. 5 export market by value this year after the US Department of Agriculture lifted a decades-old ban on Paraguayan beef due to concerns about hoof and mouth disease in late 2023.
However, President-elect Donald Trump has threatened to slap a universal 10% to 20% tariff on imports.
“I don’t see Americans eating fewer hamburgers. If they increase tariffs that will be reflected in inflation,” Renan de Lima said.
Jair de Lima founded the company that would become Frigorifico Concepcion in 1997. A meat industry veteran originally from Brazil, he has turned the company into one of the region’s top meatpackers by building and buying 15 beef and pork plants in three countries. Acquisitions in Bolivia and Brazil brought access to the prized Chinese market, which is largely closed to Paraguayan beef because of the country’s diplomatic ties with Taiwan.
“We made a lot of acquisitions in the last three years. Now we are consolidating that and in 2025 we probably won’t do acquisitions,” Jair de Lima said.
Frigorifico Concepcion is working with investment banks to raise capital through an initial public offering in the US as soon as 2026, company director Jorge Usandivaras said.
“The use of working capital and debt in this kind of company is very significant, so equity needs to expand to keep growing,” he said.
The company faced a potential crisis in May as its dollar bonds plunged after a report by a Wall Street analyst raised questions about the company’s finances. Frigorifico Concepcion held meetings with bondholders to alleviate concerns, but the bonds are still below the 88 cents they traded for prior to the analyst report. Usandivaras expects the bonds will return to pre-selloff levels in the first half of 2025.
The company is targeting sales of $1.8 billion, Ebitda of $200 million and debt of $800 million this year, Usandivaras said. Revenue will probably top $2 billion in 2025, he said.
--With assistance from Gerson Freitas Jr..
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