Outlook

Colombian Beef Cattle Farming

Economic, Industry & Market Research Area July, 2022

Good Moment for Beef Cattle Farming

in Colombia
Beef Cattle Farming Overview

Agribusiness Sector Research

Head Analyst Assistant

Jhon Fredy Escobar Posada Andres Felipe Sarmiento Fernandez Santiago Gomez Monsalve
jhescoba@bancolombia.com.co ansarmie@bancolombia.com.co sgmonsa@bancolombia.com.co
International Meat Prices and FX Rate will
Boost Exports Even More
Exports of Colombian beef and live cattle by country of
Egypt consolidates as the first export destination. Exports from
destination (tons) and growth (YoY)
the beef cattle sector grew 7% in volume and 48% in value in
2021, showing the pace of increase in international beef prices
over the past year. So far this year, volume and value have
grown 46% and 60%, respectively, and Egypt keeps
consolidating as the main export destination, especially for live
cattle.
An 8% drop in meat imports is expected in Egypt but it should
not affect Colombia. According to the USDA, meat imports in
Egypt this year will fall by 8%. Among the suppliers for that
country, in addition to Colombia, is Brazil, which will surely be
quite focused on the Chinese market, due to the increase in
imports, and the reactivation of some Brazilian companies
which were temporarily restricted due to sanitary issues.
Source: Grupo Bancolombia, Sicex.
The Russian market remains opened for Colombia amidst
conflict with Ukraine. In February, a slight increase in meat Beef cattle exports from Colombia and Brazil;
supply in Colombia was expected due to a possible closure of imports from China and Egypt (thousands tons)
the Russian market. As of May, meat exports to Russia have
remained solid, with a growth of 81% in volume, dispelling, so
far, any doubt about a possible risk of a decrease in exports
due to the war.
Live cattle exports offset declines in meat exports. As of May,
meat exports in volume closed with a fall of 25%, while live
cattle rebounded, growing 75%, which allowed an aggregate
growth of exports of 46%. The recent behavior of the USDCOP
exchange rate in our country makes the export business even
more profitable amidst high international demand.
Amidst the good situation in the sector, some uncertainties
arise. From the beginning of June and during the first fortnight
Source: Grupo Bancolombia, USDA, Sicex.
of July, the local price of cattle had a downward trend, due to *2022 projection with own estimates.
difficulties with the export of live cattle due to the entry into
force of ICA resolution 097977, which requires exporters Comparative prices of live male cattle
measures regarding animal welfare and quarantines for the Colombia vs. Brasil
export of livestock, which has slowed down exports while
waiting for the certification of exporting lots. This is worrying
due to the fall in June of the price of live cattle in Brazil, which
could transfer international purchases to this market. In
addition, there are concerns generated by a possible agrarian
reform, which should charge higher taxes on rural properties
with an agricultural vocation that do not meet certain
productivity conditions, still pending definition.

Source: Grupo Bancolombia, Fedegan.

High Demand for Meat Takes its Toll on
Colombian Cattle Stock
The price of beef keeps growing amidst lower local supply. Cattle slaughter in Colombia (heads)
While exports continue to rise, the slaughter (in heads) for
national supply closed May with a 6% drop. Thus, the increases Male Female Total
Period Live Exports
in prices throughout the chain continue: while the price of live Slaughter Slaughter Slaughter
cattle accumulates a 37% growth, the CPI grows 26%. 2020
1,799,332 1,205,157 3,257,033 264,107
The drop in female cattle stock in 2021 doubles the drop in the
2021
total stock. While the total livestock fell 0.8% in 2021, the 1,777,259 1,194,176 3,302,083 247,171
stock of females fell 1.6%, with only a slight growth of 0.6% for Jan-May
heifers. With higher prices in 2022, and the consistent growth 2022 1,240,478 506,939 1,240,478 194,109
of exports, female retention becomes a key aspect to monitor % Var Jan-
-6.7% 8.2% -6.7% 40.9%
in order to maintain the pace of growth in the livestock May
business.
Source: Grupo Bancolombia, DANE, FEDEGAN.
Is the livestock cycle in Colombia evolving contrary to
expectations? Usually, in periods of rising local beef prices, the
country enters a phase of retaining a higher share of the Cattle inventory by age and growth percentage of total
female cattle stock to increase future production. However, number of females and total cattle stock
since mid-2021, although the price has remained on the rise,
the slaughter of females has also been on the rise, and from
January to May 2022 there is an 8% growth. This situation
raises two concerns: is the lack of males for domestic supply
and the growth in prices leading to the slaughter of less
productive females? And if this trend continues, will the
growth of the sector be put at risk for the years to come?
The slaughter of females expands to most of the national
territory. In our report published in January, we highlighted
that during 2021 Cordoba and Santander, the departments
most involved in exports, presented a trend of reducing
slaughter for domestic consumption with a growth in the
slaughter of females. For this year, as of May, the same trend
has migrated to the main livestock departments of the Source: Grupo Bancolombia, UPRA.
country, except Antioquia, where the slaughter of females falls
8%. Variation of female slaughter and total cattle for domestic
supply by region
2022: year of good demand and tailwinds for beef cattle
farming. Despite the recent drops in the price of live cattle, the
beef cattle farming sector should close a positive year in
Colombia. With the announcement of compliance with the ICA
requirements by exporters, live cattle export dynamics should
return in August, which will once again drive price up. Thus,
the speculation generated by possible government decisions
can only be appeased with the return of live cattle exports,
which as of May already showed an appealing growth of 134%.

Source: Grupo Bancolombia, DANE.

 Economic, Industry and Market Research
Chief Economist and Head of Economic, Industry and Market Research
Economic Research
Arturo Yesid González Peña
Head of Quantitative and Analytics
arygonza@bancolombia.com.co
Santiago Espitia Pinzón
Macroeconomic Specialist
sespitia@bancolombia.com.co
Deiby Alejandro Rojas Cano
Macroeconomic Analyst
deirojas@bancolombia.com.co
Jorge Eliécer Montoya Gallo
IFRS 9 Analyst
jomontoy@bancolombia.com.co
Sebastián Ospina Cuartas
Quantitative Analyst
sospina@bancolombia.com.co
Julián Rozo Méndez
Intern
jurozo@bancolombia.com.co
Juan Pablo Espinosa Arango
juespino@bancolombia.com.co
Industry Research
Jhon Fredy Escobar Posada
Head of Agroindustry Research
jhescoba@bancolombia.com.co
Nicolás Pineda Bernal
Head of Commerce Research
nipineda@bancolombia.com.co
Mateo Andrés Rivera Arbeláez
Commerce Sector Analyst
marivera@bancolombia.com.co
Andrés Felipe Sarmiento Fernández
Agroindustry Analyst
ansarmie@bancolombia.com.com
Javier David Villegas Restrepo
Real Estate and Hotels Analyst
javilleg@bancolombia.com.co
Maria José Bustamante Grajales
Commerce Sector Analyst
mabustam@bancolombia.com.co
Santiago Gómez Monsalve
Administrative Assistant
sgmonsa@bancolombia.com.co
Luisa Fernanda Cano Hernández
Intern
luisacan@bancolombia.com.co
Research Assistant
Alejandro Quiceno Rendón
Research Editor
aqrendo@bancolombia.com.co
Equity Research
Jairo Julián Agudelo Restrepo
Head of Equity Research
jjagudel@bancolombia.com.co
Diego Alexander Buitrago Aguilar
Utilities Analyst
diebuit@bancolombia.com.co
Andrea Atuesta Meza
Financial Sector Analyst
aatuesta@bancolombia.com.co
Juan Camilo Dauder Sánchez
Construction Sector Analyst
jdauder@bancolombia.com.co
Ricardo Andrés Sandoval Carrera
Oil & Gas and Airlines Analyst
rsandova@bancolombia.com.co
Laura Natalia Capacho Camacho
Junior Sector Analyst
lcapacho@bancolombia.com.co
Juan Esteban Echeverri Agudelo
Media
jueagude@bancolombia.com.co
Bryam Antonio Daza Rodríguez
Intern
bdaza@bancolombia.com.co
Terms of Use: This report has been prepared by Analysis Bancolombia a research and analysis department at Grupo Bancolombia. It shall not to be
distributed, copied, sold, or altered in any way without the express permission of Grupo Bancolombia, nor be used for any purpose other than to serve
as background material which does not constitute an offer, advice, recommendation, or suggestion by Grupo Bancolombia for making investment
decisions or conducting any transactions or business. The use of the information provided is solely the responsibility of the recipient.
Before making an investment decision, you should assess multiple factors such as the risks of each instrument, your risk profile, your liquidity needs,
among others. This report is only one of many elements that you should consider in making your investment decisions. In order to extend the content
of this information, we ask you to contact your business manager. We recommend you not to make any investment decision until fully understanding
all factors involved in such decisions. Fixed income and equity securities, interest rates, and other information found here are purely informational and
are not an offer or firm demand to perform transactions. Also, according to the applicable regulations, our opinions or recommendations do not
constitute a commitment or guarantee of return for the investor.
The information and opinions in this research report constitute a judgment as of the date indicated and are subject to change without notice. The
information may therefore not be accurate or current. Future projections, estimates, and forecasts are subject to several risks and uncertainties that
prevent us from ensuring that they will prove correct or accurate, or that the information, interpretations, and knowledge on which they are based
will be valid. In that sense, actual results may substantially differ from the forward-looking statements contained here. You should be aware of the
fact that investments in securities or other financial instruments involve risks. Past results do not guarantee future performance.
The entities that are part of Grupo Bancolombia may have acquired and maintain at the time of preparation, delivery or publication of this report, for
their own position or that of their clients, the securities or financial assets to which the reports refers. Grupo Bancolombia has risk policies to avoid a
concentration in their own positions and those of their clients, which contributes to avoid conflicts of interest.
As regards to conflicts of interest, we declare that (i) Valores Bancolombia S.A. Comisionista de Bolsa and/or Banca de Inversión Bancolombia S.A.
Corporación Financiera have participated in structuring or underwriting/placing equity securities for Bancolombia S.A., (ii) Grupo Bancolombia is the
beneficial owner of 10% or more of the shares issued by Valores Simesa S.A., and Proteccion S.A., (iii) Bancolombia is one of the biggest shareholders
of Fondo Inmobiliario Colombia – FIC, and (iv) Valores Bancolombia S.A. Comisionista de Bolsa is a wholly owned subsidiary of Bancolombia S.A.
Nevertheless, it has been prepared by our Analysis Bancolombia department team based on strict internal policies that require from us objectivity and
neutrality, as well as independence from our areas of brokerage and investment banking.
The information contained in this report is not based, does not include nor has been structured based on privileged or confidential information. Any
opinions or projections contained herein are solely attributable to the author and have been prepared independently and autonomously in the light of
the information available at the time.
The content of this message does not constitute a professional recommendation to make investments according to the terms of article 2.39.1.1.2 of
the Decree 2555 of 2010 or the regulations that modify, replace or complement it.

Rating System: The investment recommendation on the issuers under coverage by Analysis Bancolombia is governed by the rating system presented
below, subject to the following criteria:
The upside potential is the percentage difference between the target price of securities issued by a particular issuer and their market price. The target
price is not a forecast of the price of a stock, but a fundamental independent valuation made by Analysis Bancolombia, which seeks to reflect the fair
price the market should pay for the shares on a given date.
Based on an analysis of the relative upside potential amongst the securities of companies under coverage and the COLCAP index, the ratings of the
assets are determined as follows:
•Overweight: when the upside potential of a stock exceeds by 5% or more the return potential of the COLCAP index.
•Market Weight: when the upside potential of a stock does not differ by more than 5% from the return potential of the COLCAP index.
•Underweight: when the upside potential of a stock is 5% or more below the return potential of the COLCAP index.
•Under Review: the company’s coverage is under review and therefore there’s no rating or target price.
Additionally, at the discretion of the analyst, the speculative qualification that complements the recommendation will continue to be used, taking
into account the risks seen in the performance of the asset, its future development and the volatility the movement of the stock may show.
The fundamental potential of the index is determined based on the methodology established by the BVC for the calculation of the COLCAP index,
considering the target prices published by Analysis Bancolombia. This will be made with the Colcap basket on the dates of calculation May and
November of every year. For the companies part of the index but not covered, the consensus of market analysts will be used.

Currently, Analysis Bancolombia has 18 companies under coverage, distributed as follows:

Overweight Under Review Underweight Restricted

Number of issuers with ratings of: 10 3 3 1

Percentage of issuers with ratings of: 59% 18% 17% 6%