Cattle prices in Brazil are surging, putting significant pressure on meatpackers’ profitability. Since early September, the cost of livestock has skyrocketed by 50%, with no clear consensus among experts on whether prices have peaked.
“It’s insane. Cattle prices just keep climbing,” said Maurício Nogueira, founder of Athenagro, a consultancy specializing in the livestock market.
What makes this situation particularly striking is the absence of a classic livestock cycle shift, where cow retention typically reduces the availability of animals for slaughtering to encourage calf production. Instead, slaughter rates have hit record highs and remain exceptionally elevated, according to Lygia Pimentel, partner at Agrifatto consultancy, another reference in the market.
“I would never have predicted such a steep price increase. The most optimistic forecast had the price per arroba at 270 reais,” Pimentel said. On Monday, it reached 344 reais ($60) per arroba (15 kg), according to Cepea’s index. “I’ve been analyzing this market for 20 years and have never seen demand driving prices like this.”
Meatpackers have also been caught off guard. Banking on ample cattle supply at reasonable prices, the industry entered relatively few forward contracts with ranchers. When the market shifted in September, slaughterhouses had no choice but to buy cattle at inflated prices.
Margins under pressure
Some in the industry are already feeling financial strain. “The impact on fourth-quarter results is material,” said the CEO of a mid-sized meatpacking company, noting an EBITDA margin dropping below 5%, potentially nearing breakeven.
Large-scale players, including giants like JBS, Minerva, and Marfrig, have mechanisms to sustain higher profitability. Still, maintaining double-digit margins, as seen in the third quarter, is unlikely.
Last week, JBS Global CEO Gilberto Tomazoni said that the profitability of the beef business in Brazil would likely drop in the fourth quarter to levels closer to historical averages, which have hovered around 4.6% EBITDA since 2017.
“There’s no magic solution. Higher cattle prices impact margins directly. It’s impossible not to feel the effect,” said another industry executive.
Domestically, passing on rising cattle costs to beef prices is becoming difficult despite a strong demand. Abroad, China has been willing to pay more for Brazilian beef, but a natural lag exists between contract pricing and production costs.
Despite the current pressures, the industry can take solace in the robust performance during the year’s first eight months, with margins well above historical averages.
For exporters like Minerva Foods, which generates about 70% of its revenue abroad, the strong dollar has been a crucial advantage. “Dollar prices might not be great, but when converted to reais, they’re very favorable,” Nogueira said.
Negative margins in local sales
Domestic-focused meatpackers face a grimmer scenario, especially from 2025 onwards. The gap between deboned beef and live cattle prices has already turned negative by 4.61% in Sao Paulo, Athenagro’s data shows. That’s one of the worst levels in the consultancy’s historical series, which began in 2007. The average margin is typically a positive 3.71%.
If margins are this tight while cattle supply remains relatively high, what happens when the livestock cycle fully shifts, further tightening animals’ availability?
According to Pimentel, the industry is heading toward a cyclical downturn, with cattle shortages becoming more pronounced between the second half of 2025 and 2026. Prices will almost certainly break the 400 reais per arroba threshold, she said.
