El Nino Threatens Brazil's Chicken Industry with Higher Feed Costs

Brazil's chicken industry is facing a potential squeeze on margins next year due to the threat of El Niño, which could disrupt grain production and drive up feed costs. The sector has enjoyed strong exports and manageable feed costs this year, with chicken production expected to rise 5.6% in 2026 and exports climbing 10.3%, according to Ricardo Santin, president of Brazilian animal-protein association ABPA.

However, the outlook could become more challenging as the industry heads into 2027, particularly if grain prices increase. Feed accounts for about 60% of chicken production costs, making grain prices a key driver of profitability.

César de Castro Alves, an agribusiness consultant at Itaú BBA, warns that poultry producers should consider carrying larger-than-normal corn inventories into next year as protection against possible supply disruptions. Large processors are already taking steps to reduce their exposure, including MBRF, Brazil's largest poultry exporter, which is extending its grain coverage through forward contracts.

The industry also faces risks beyond feed costs, including a possible European Union ban on Brazilian meat imports over antimicrobial requirements and an outbreak of avian influenza at commercial poultry farms. However, Alves notes that exporters should be able to redirect EU-bound chicken to other markets if restrictions take effect.