BRF creates joint venture with Saudi Arabian sovereign wealth fund and dominates chicken market in the country – ISTOÉ DINHEIRO

THE Saudi Arabia
aims to become a global benchmark for excellence on several fronts. To this end, it created the Vision 2030 project. The ambitious development plan contains both comprehensive goals — one of which is to jump from 19th to 15th position among the world’s largest economies — and specific goals, such as strengthening food security. In this regard, reducing dependence on chicken meat imports is strategic. And this is one of the reasons for the formation of the joint venture between the Public Investment Fund (PIF), the country’s sovereign wealth fund, which is one of the largest in the world, and Brazil’s BRF, leader in the global production of chicken meat.

Currently, BRF maintains a factory in Saudi Arabia, dedicated to the processing of raw material supplied by its Brazilian units. With the joint venture, it will take over the complete package of chicken production in the country, from raising poultry to selling fresh, frozen and processed products. It will have a 70% stake in the new company, created with an initial investment of US$ 350 million. Through Sadia, BRF already accounts for 36.3% of the total chicken meat market in the Middle East, according to information from the Bloomberg news agency. In a period of silence required by regulatory bodies, BRF did not grant an interview.

Taking into account Saudi Arabia’s ambitions in relation to the chicken meat market, BRF’s horizon is very broad. According to data from the United States Department of Agriculture (USDA), the country’s domestic consumption in 2021 exceeded 1.5 million tons, while local production was 920 thousand tons. For the account to close, it is necessary to import a good part of the demand. This is where Vision 2030 makes a difference: the goal is to reduce the volume of imports to 20%, raising domestic production to 1.2 million tons.

These changes help explain the 20% drop in the purchase of Brazilian chicken meat by the Saudis. In 2020, they imported more than 418.7 thousand tons, but last year this volume was 333.6 thousand tons. For the president of the Brazilian Association of Animal Protein (ABPA), Ricardo Santin, the reduction is a consequence of a sovereign decision of the country. “But nothing prevents the Arab market as a whole from continuing to be a major importer,” he said. So much so that, from 2020 to 2021, the United Arab Emirates switched positions with Saudi Arabia in the ranking of the largest importers of chicken meat in Brazil, taking third place.

HALAL MARKET According to the president of ABPA, the field of opportunities for the Brazilian chicken meat industry with the international Islamic community is promising. Brazil is already the largest global supplier of halal protein, which requires special care from creation to slaughter. “In total, halal meat exports exceed 1 million tons,” said Santin. According to him, this demand is significant even in places where Islam is not the dominant religion.

If it depends on the entity, Brazil’s operation in the halal market will continue to advance. Between February 13th and 17th, ABPA representatives will be in Dubai, at Gulfood, one of the main international fairs in the food sector, to reinforce the commercial relationship that is already a tradition. “In the last 20 years, exports to the Islamic community exceeded 24.5 million tons, almost 1 million containers,” said Santin.

CHANGES IN THE ANIMAL PROTEIN INDUSTRY

BRF plans to reach the end of this decade with net revenue of R$ 100 billion. To do so, it will have to reduce its net debt, which in September 2021 was over R$16 billion. The company’s shareholders released a public offering of 325 million shares and ADRs (share receipts traded in the United States), which could generate revenue close to R$8 billion, depending on the value on the stock exchange. And it could also pave the way for Marfrig, which already owns 31.66% of BRF, to take control of the company.

Meanwhile, JBS, the largest company in the sector, is moving. It has just announced its new president in Brazil: Gilberto Meirelles Xandó Baptista, former CEO of Vigor Alimentos. His seat on the Board of Directors will be occupied by Carlos Hamilton Vasconcelos Araújo, as an independent member. Former director of Economic Policy at the Central Bank, Araújo sits on the boards of Brasilprev and FGV.