JBS May Purchase Rivals Whose Margins Have Weakened, UBS Says

By Alexander Ragir

Bloomberg

July 30, 2008

(Bloomberg) -- JBS SA, the world's biggest beef producer, may begin purchasing Brazilian rivals as rising cattle prices hurt their profit margins, UBS said.

Margen, a Brazilian meatpacker controlled by Mauro Suaiden and Geraldo Prearo, missed a payment this month on 169 million reais ($107.3 million) of bonds that may trigger a change in ownership, Valor Economico newspaper reported yesterday. Margen has been hurt this year by rising cattle prices and the European Union restrictions to Brazilian beef, Valor said.

``We believe this is the first relevant piece of evidence that margins in Brazil are deteriorating (mostly due to cattle prices) and that highly leveraged companies, with large dependence on the domestic market, might suffer difficulties going forward,'' wrote analysts Guilherme Arruda and Jander Medeiros in a note to clients. ``JBS could benefit from adverse conditions in Brazil, which should eventually lead to further consolidation opportunities.''

Sao Paulo-based JBS is benefiting from its operations outside Brazil. The company got 60 percent of its revenue from exports last year, according to data compiled by Bloomberg.

Margins at JBS's operations in the U.S. may show a ``very substantial improvement,'' the analysts wrote.

bloomberg.com

Brazil beef exports to grow by a third thru 2017

MSN Money

July 30, 2008

SAO PAULO, July 30 (Reuters) - Brazil, already the world's top exporter of beef, will likely see shipments grow nearly one-third by 2017, leading private agricultural consultants AgraFNP said late on Tuesday.

Latin America's largest country could ship as much as 2.9 million tonnes of beef by 2017, the consultancy said, noting that rival producers such as Australia, the United States and Argentina were limited by land scarcity and dry weather.

"The outlook (for exports) for Brazil is subject to market conditions. The number could be higher if there is a supply problem on the international market and if Brazil gains access to new markets," Jose Vicente Ferraz, AgraFNP's technical director, told journalists.

The consultancy estimates world beef production will grow 250,000-300,000 tonnes per year, driven by demand in Asia and the United States.

Brazil would not be able to absorb this increase alone by increasing its herd and the strength of demand is likely to see domestic prices climb by a further one-fifth from current record high levels within 5-10 years, AgraFNP said.

The Brazilian herd should increase to 183 million head in 2017, up from 170 million currently due to improved nutrition and breeds, the consultancy said.

Production is likely to become more land-efficient, AgraFNP said. Current total grazing land of 190 million hectares is likely to fall by 17 million hectares by 2017, as more pasture goes to crop production amid rising demand for food. (Reporting by Roberto Samora; translated by Peter Murphy; editing by Reese Ewing and Jim Marshall)

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