The country’s largest feedlot group sees recovery in the sector’s profitability in the next two years
The last two years have seen negative margins for Brazilian cattle ranchers and feedlot operators. However, the constant increase in the price of arroba and replacement animals marks a change in the cycle. Thus, MFG Agropecuária, the country’s largest feedlot group, projects a scenario of expansion and positive margins for 2025 and 2026.
“We can already say that 2024 was a year of positive adjustment. We had better livestock farming, with better margins for the investor, who is the cattle rancher, for the feedlot and for the industry. […] Even though the cost of production has gone up a bit, the price of beef has also gone up in recent days and is equalizing and managing to create a better price condition”, explains Vagner Lopes, general manager of feedlot operations at MFG Agropecuária.
To illustrate the recent appreciation, the price of a fattened steer in the state of São Paulo reached an average value of R$ 352.00 this week, according to the Cepea indicator. The amount is 10.48% higher than the average trading at the beginning of November (R$ 320.55) and 34.6% higher year-to-date.
The same scenario applies to replacement. According to the Cepea indicator, based in Mato Grosso do Sul, calves reached R$ 2,683.92 per head on Tuesday, the 26th. The daily variation was 0.71% and the monthly variation was 11.41%. This year, the increase has reached 28.6%
To Agro Estadão, the manager of MFG Agropecuária explained that the situation is a consequence of the increase in the slaughter of females. “We will face a challenge in replacement, which will boost the price of the calf market. So, it will be good for the cattle breeder, because there will be a very high demand for the animal next year”, highlights Lopes.
The company expects to end this year with 300 thousand heads slaughtered — a higher volume than that recorded in 2023, which was 270 thousand animals. For 2025, the projection is around 330 thousand slaughters.
Vagner Lopes, general manager of confinement operations at MFG Agropecuária. Photo: MFG Agropecuária/Disclosure
Confinement cost
The relationship between production cost and profitability is a point to be analyzed in the confinement system. Currently, MFG Agropecuária works with two business modalities for confinement: per day and per arroba produced. (Learn more about the cattle feedlot)
Under the daily rate model, the average cost to keep an animal in confinement for 100 days is around R$15 per day — R$1,500 over the period. This amount covers the feeding services, health protocol, vaccinations and traceability of the animal. “We direct this to the meatpacking industry, with some tools to lock in and protect the price. They [the cattle rancher] know how much they will spend to fatten the animal in confinement,” explains Vagner.
Under the arroba rate model, the cattle rancher pays around R$200 for each arroba produced in confinement. “When we talk about attractiveness, I’m spending R$200 to produce one arroba and I’m selling that arroba for R$330. So there’s a R$130 margin between my cost and my sale,” highlights the manager of MFG Agropecuária, commenting that before the pandemic this margin was around R$50 per arroba.
Another important issue in confinement is the price of corn, the main input in the composition of animal feed, with mixtures that vary between 40% and 60% of the animal’s diet depending on the region.
Today, given the increase in corn-based ethanol production, there is an expectation of an increase in grain processing. In this context, byproducts, such as DDG (dry distilled grains) and WDG (wet distilled grains) appear as an alternative to balance the cost in confinement.
“If a plant starts producing ethanol from corn, it will compete with feedlots and feed mills, but there will be byproducts left over, which is DDG, which is WDG, which comes from corn,” says Lopes. According to him, even though they cannot replace 100% of corn, the alternatives help to balance the animal diet and achieve a good cost for the feedlot operator.