Brazilian Beef Industry Needs Cash

[farmers_son]

I thought this news item was interesting for a number of reasons. Brazil may have advantages but also has weaknesses that will limit their industry. That the crucial success factors for a nations cattle industry are markets and cash. Canada's real strength may not be our mountain views or prairie vistas or our particularly great beef rather our stengths as an industry may be our banking system and the ability (or inability) of our federal governemnt to lever our energy reserves to gain or maintain market access for our cattle and beef.

Hope this is as interesting to others as it was to me...

See:
http://www.mla.com.au/TopicHierarchy/News/MarketNews/2009/Brazilian%20beef%20industry%20needs%20cash.htm
Brazilian beef industry needs cash


19/03/2009

The Brazilian beef industry and government are discussing working capital aid measures through the Brazilian National Development Bank (BNDES, which a stakeholder in a number of beef companies through previous share acquisitions), as at least 18 companies are experiencing difficult financial situations. This is due to the current economic conditions, which have led to poor demand, low beef prices, still relatively high cattle prices, but predominantly scarce and expensive credit (Agripoint). The aid would consist of credit lines totalling A$800 million and A$13 million in loans to individual companies for beef stock and production carrying costs.

According to the Brazilian Beef Exporters Association (ABIEC), the industry needs access to credit lines with lower interest rates and longer terms (banks are lending at a 60 day term, while the industry needs between 180 to 360 days). Currently the beef export industry requires around A$1 billion in credit for pre shipment lines, while producers are still to receive A$460 million for cattle sold on credit to processors.

Out of the 21 companies associated with ABIEC, seven have already filed for legal insolvency aid (collectively employing 52,000 workers directly), while at least 50 plants associated with the Brazilian Meatpacking Association (Abrafrigo), which trade in the domestic market, have currently stopped operations.

[farmers_son]

Some more about credit in the beef industry:

http://www.bloomberg.com/apps/news?pid=20601012&sid=aWGjVlzNsXfw&refer=commoditi es

Tyson Foods Agrees to New $1 Billion Credit Facility (Update2)
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By Kevin Orland

March 9 (Bloomberg) -- Tyson Foods Inc., the second-largest U.S. chicken producer, entered into a new $1 billion credit facility as it seeks to reduce debt and finance its operations.

The agreement with JPMorgan Chase & Co. will mature on March 9, 2012, and is backed by the company’s cash, inventories and accounts receivable, Springdale, Arkansas-based Tyson said today in a statement.

Chicken producers including Tyson and rival Pilgrim’s Pride Corp. have struggled with higher feed costs and a glut of supplies. Tyson also said it closed a previously announced sale of $810 million in five-year, 10.5 percent senior notes, which it will use to pay off other debts.

“The offering and new credit facility provide Tyson with continued financial flexibility, giving us the option of paying off some existing debt early as well as funds for future financing needs,” Chief Financial Officer Dennis Leatherby said in the statement.

Tyson rose 7 cents to $8.05 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 8.1 percent this year.

For Related News and Information: Company News: TSN US <Equity> CN <GO> More stories about new corporate bonds: NIM3 <GO> More bond stories: TOP BON <GO>

[smcgrath76]

Other aspects of advantage are infrastructure (basics such as roads and trucks). Even though there is processing capacity there is a lot of infrastructure to be desired. As Brazil increases its infrastructure (eg: paved roads into the cerrado) I strongly suspect we will see cost of production increases there as well.

[smcgrath76]

Other aspects of advantage are infrastructure (basics such as roads and trucks). Even though there is processing capacity there is a lot of infrastructure to be desired. As Brazil increases its infrastructure (eg: paved roads into the cerrado) I strongly suspect we will see cost of production increases there as well.