JBS benefits as US peers count cost of drought - leatherbiz: Leading n Leatherbiz

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JBS benefits as US peers count cost of drought

02/10/2012
JBS, the world’s largest beef producer, is set to post its highest quarterly profit since 2008 as its US peers suffer the effects of the country’s worst drought in 56 years.

The Brazilian group’s cattle are fed on grass, whereas in the US cattle are fed on corn and other grains. The drought has led to a severe shortage of corn, pushing up prices and eroding margins.

Sao Paulo-based JBS also has been shielded from rising cattle costs after Brazilian prices fell in August to the cheapest relative to US prices in five years.

Third-quarter net income for JBS will be $164 million, compared with a loss of 67.5 million in the third quarter last year, according to Bloomberg estimates.

“Brazil is in a sweet spot for the next 18 months,” said Eric Conrads of ING Groep NV in New York. “Brazilian cattle are grass-fed so you don’t care about corn.”

Henrique Koch, an analyst at Banco do Brasil, added: “It seems that JBS pushed back on acquisitions and is focusing on efficiency. That’s good news, they are doing their homework. They are set to keep improving as they increase capacity usage at their Brazil beef plants.”
 


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