Brazil drought problems spread to cattle farms

Echoing the recent surge in coffee prices, cattle prices in Brazil have gained, as high temperatures and unseasonably low rain fall has impacted grazing pastures, "bringing difficulties" in fattening animals.

The lack of rains and very high temperatures in most part of Brazil since the end of the last year affect the development of pastures, bringing difficulties for the fattening of animals that would be slaughtered in this early 2014", research institute Cepea said.

Brazil, where most cattle are grass-fed, recorded the hottest January on record last month.  São Paulo witnessed a 3 degree increase in average temperatures on the prior January, according to the National Institute of Meteorology of Brazil.

 "South-eastern and central-western states have water deficit," added Cepea.  The key agricultural-producing southeast and west areas witnessed the lowest rainfall in two decades, according to meteorologists. 

"Water reserves in the soil oscillate from 20% to 40%, below the range considered adequate for the vegetation growth," said Cepea. 

Price impact

Coffee has soared in recent weeks and the effects of the hot-dry conditions have started to bolster livestock prices, which normally ease after the Christmas demand rush.

The Fed Cattle Price Index for the São Paulo State recorded on a slight increase of 0.3% in January to end the month at $47.59. 

The index has since edged higher, posted its highest close since the end of December at $48.71.  The index ranged between $41.41-50.80 in 2013.

Feed cattle futures in Chicago are currently up 0.2% on the day.  March futures are down 2% from their January 22 peak of 170.80 cents a pound amid falling wholesale beef values.

Rains are seen returning

"The weather pattern is in a groove in South America with drought continuing over most of Brazil," report Martell Crop Projections, as a "stable ridge of high pressure has dominated the Brazil tropics creating widespread drought."

In addition Martell said that "nagging heat would continue in south Brazil, though less hot than previously".

 However Brazil's weather forecaster Somar suggests the pressure for ranchers may ease with rains seen returning to Brazil's centre-south farming region next week. 

"The lack of rains is especially critical," warned Cepea.

 "The lack of rains is especially critical in São Paulo, Goiás and South Minas Gerais, where most pastures are still at bad condition."

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