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Brazil beefpackers halt production as cattle price soar, domestic demand dwindles

SAO PAULO, April 12 (Reuters) - Brazilian beef-packers are halting production in selected locations, as a rise in costs that cannot be passed through to consumer prices have their squeezed margins, sources and industry representatives told Reuters.

Multiple small, medium and large production facilities have gone through stoppages or remain idle as they adjust supply to demand, said Paulo Mustefaga, president of trade group Abrafigo, without providing additional details.

“The price of cattle has risen by about 60% over a year and the industry was able to pass through 40% of costs at best,” Mustefaga said. “The sector is having a hard time making ends meet.”

The 15-kilo arroba, a Brazilian benchmark for cattle prices, hit a historical high of 320 reais ($55.95) in recent days, boosted by low animal supplies and heated demand for Brazilian beef exports, particularly from China.

Mustefaga said another factor forcing companies to reduce slaughtering is a fall in the purchasing power of Brazilian families, as the coronavirus pandemic slowed Brazil’s already lackluster economic activity.

Brazil’s second-biggest beef processor Marfrig, which owns National Beef in the United States, confirmed to Reuters that it sent employees on furlough at a unit in the town of Alegrete for 30 days. Slaughtering there resumed April 1.

The company also said it temporarily halted a plant in Rondonia state.

Minerva Foods, South America’s biggest beef exporter, halted a Mato Grosso state facility and has not set a timeline for returning, a source close to the company said on condition of anonymity.

Last month, Minerva halted a plant in Sao Paulo state for 20 days, but production has now resumed.

Minerva declined to comment. ($1 = 5.7193 reais) (Reporting by Nayara Figueiredo Writing by Ana Mano Editing by Marguerita Choy)

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