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JBS hopes lower Brazilian corn prices will support margins

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Rising cattle availability and low feed prices will reduce costs and increase meatpacker margins next year, JBS boss Wesley Batista said.

As the acute corn shortage in Brazil eases, the availability of cattle will increase, allowing increased sales.

JBS, the world's biggest meat packer, expects to reduce the amount of debt on its books next year, thanks to improved cash generation, Mr Batista said in a conference call with analysts.

Mr Batista said the company would focus on cash generation thorough 2017, in an attempt to deleverage its balance sheet, which is still laden with debts after years of rapid expansion.

Grain squeeze

A shortage of grain, especially corn, has put the squeeze on livestock producers in Brazil.

"We are facing some challenge moments in the Brazilian market," said Mr Batista.

For both the company's chicken and beef businesses, he flagged the appreciation of the real, which is hurting exports, as well as high corn prices.

Cycle turns supportive

But Mr Mr Batista said that the production cycle for cattle in Brazil was starting to favour meatpackers, thanks to increasing livestock supply.

"The worst is behind us," he said.

"Projections are indicating that we will have an increase in production of corn of close to 40% to the middle of the year," said JBS' director of Investor Relations.

"So we should have a bumper harvest, climate has been favorable up until now, and that would give us a completely different dynamic in terms of fees and feed costs for 2017."

This week JBS reported a 74% drop in profits, thanks to lower sales in South America, to 887.1m reais, but sales in North America were up.

JBS shares were up 3.4% in afternoon deals, at 9.61 reais.

By William Clarke

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