January 28, 2013

 

Starting February 1, Japan will relax its restrictions on beef exports from the US, which Brazil's JBS SA expects its JBS USA division to benefit from significantly.

 

Japan will begin to allow the purchase of beef from cattle slaughtered in the US up through 30 months of age, Jeremiah O'Callaghan, investor relations director with JBS said on Thursday (Jan 17). Currently, Japan only accepts beef from cattle aged up to 20 months.

 

"The vast majority of cattle slaughtered in the US are in the 20-30-month range," O'Callaghan said. "A small percentage comes to the market under 20 months."

 

One example of a product currently in short supply in Japan that exporters could capitalise on is beef tongues, he noted. JBS has been a long-time supplier of a wide range of cuts and offal to Japan.

 

"What we envisage now is providing more volume for a very traditional customer base that we could not serve to our satisfaction until now due to restrictions," O'Callaghan added.

 

Japan's age restrictions have been rooted in the case of bovine spongiform encephalopathy (BSE) detected in the US in 2003. Older animals are more prone to the disease. At that time the US was the largest beef exporter to Japan; Australia has since overtaken the US as Japan's main supplier.

 

JBS USA, which includes beef, pork and poultry operations, accounts for roughly 70% of the company's overall revenue. Shares of JBS rose 6.35% on Wednesday (Jan 16) to BRL7.36 (US$3.63) on Brazil's Bovespa stock market, the highest increase for any stock that day.

 

Easing the Japanese restrictions has been in the works since at least last year, when in October the Japanese Food Safety Commission recommended the changes to beef import policy.

 

A positive ripple effect may be felt by Brazil-based beef processors, as the US may need to import more beef to satisfy internal demand if it increases exports to Japan, Fernando Sampaio, executive director of the Association of Brazilian Beef Exporters (Abiec), said. That may create new demand for Brazilian beef in markets that export to the US, he said.

 

Japan only imports heat-treated beef from Brazil, avoiding fresh beef because of Brazil's history with confirmed cases of foot-and-mouth disease. Some 1,550 tonnes of processed Brazilian beef were sold there last year, down 50% from 3,091 tonnes in 2011.

 

Japan, Asia's largest beef importer, was the first country to suspend Brazilian beef imports following the December 7 announcement of a non-classic case of BSE from 2010 in Brazil's Parana state.