March 29, 2018 / 9:00 PM / 23 days ago

Trade bans, feed costs force furlough at Brazil chicken processor

SAO PAULO (Reuters) - Brazil’s third-largest chicken processor said on Thursday it would put 1,391 workers on paid leave at a plant in the southern state of Santa Catarina, in the latest fallout from European and Russian trade bans and rising corn costs.

The measure, which takes effect in June, makes privately-owned Cooperativa Central Aurora Alimentos the second big food processor in Brazil to trim staffing levels in less than a week.

Rival BRF SA (BRFS3.SA), the country’s largest chicken processor, on Tuesday said it would give 30 days of paid leave to around 3,000 workers from May 7 at a Santa Catarina plant.

BRF announced the plans after the Brazilian government in mid-March temporarily halted production and certification of poultry exports from the scandal-hit food processor to the European Union. Executives at BRF, which faces claims it acted to evade food safety checks, were arrested in connection with an on-going food safety probe.

Aurora said Brazilian animal protein companies have faced hardship since August of last year. In June, Aurora will decide whether to send workers at another, unspecified unit, on paid leave, the cooperative said in a statement.

“A number of Brazil-based chicken processors have been banned from exporting to Europe beginning in the last two months of 2017,” Aurora said.

In December, Russia, citing growth drug ractopamine found in some shipments, also suspended imports of Brazilian beef and pork, which Aurora also produces.

“The combination of these two factors caused excess supply and falling prices,” said Aurora,

The price of feed is also weighing on the industry, with speculators “causing the artificial inflation of corn prices” in Brazil, Aurora said, adding that the situation had forced companies to start importing corn.

Reuters reported earlier this month that JBS SA (JBSS3.SA), the country’s second-largest chicken processor, ordered 30,000 tonnes of corn from Argentina to use for feed. JBS had last imported corn in March 2017 and may seek additional supplies from the United States.

During a conference call Thursday, JBS executives said Thursday the price of corn was expected to rise to 40 reais ($12) per bag from 30 reais per bag in January, putting pressure on profit margins.

($1 = 3.30 reais)

    Reporting by Ana Mano; Editing by Sandra Maler

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