Brazil’s chicken industry faces a potential squeeze on margins next year as El Niño threatens grain production, raising the risk of higher feed costs after a favorable 2026.
The industry has benefited this year from strong exports and manageable feed costs, even as domestic chicken supply expands. Ricardo Santin, president of Brazilian animal-protein association ABPA, expects chicken production to rise 5.6% in 2026 and exports to climb 10.3%.
Margins in the domestic market are around their historical average of about 35%, according to Itaú BBA’s agribusiness consultancy. But the outlook could become more challenging as the industry heads into 2027.
Feed accounts for about 60% of chicken production costs, making grain prices a key driver of profitability. El Niño could bring more irregular and lower rainfall to Brazil’s Cerrado, threatening soybean yields and safrinha corn, the second crop planted on the same land after the soybean harvest.
“The risk is on the production-cost side,” said César de Castro Alves, an agribusiness consultant at Itaú BBA. He said 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 that exposure. MBRF, Brazil’s largest poultry exporter, is extending its grain coverage through forward contracts, locking in supplies further ahead than usual, the CEO Miguel Gularte said during an earnings call this month. Smaller processors may have less financial capacity to adopt the same strategy.
For the industry group ABPA, Brazil’s grain inventories offer some protection against a potential crop shortfall. Conab, Brazil’s food supply agency, estimates 2025/26 corn carryover stocks at 14 million metric tons, while soybean meal inventories stand at about 6.4 million metric tons.
European Risk
The industry also faces risks beyond feed costs. A possible European Union ban on Brazilian meat imports from Sept. 3 over antimicrobial requirements could disrupt shipments, while an outbreak of avian influenza at commercial poultry farms would threaten Brazil’s access to overseas markets.
The EU accounted for about 7% of Brazil’s chicken exports through July, compared with roughly 25% for the Middle East and 30% for Asia. Alves said exporters should be able to redirect EU-bound chicken to other markets if restrictions take effect.
Brazil could also gain market share if its commercial poultry farms remain free of avian influenza while outbreaks continue in competing producing countries.
“If we don’t have any negative surprises, the industry is well protected by costs, demand and the external environment,” Alves said.
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
