Highlights

Production to rise 2.5 percent half of previous year   Beef demand to be sustained by domestic market   Previous higher slaughter led to fewer cattle   High beef prices by the end of the year

March 3, 2008

  

Drop in Brazil's beef exports to be accompanied by rising local demand
 

 

Brazilian beef production is estimated to increase in 2008 by 2.5 percent, a lower rate than last year, while beef exports are expected to drop by 5 percent in volume, because of EU restrictions, according to a USDA attache report posted Friday (February 29, 2008).

 

However, strong domestic demand and exports to new markets likely will offset most of the decline in the EU. These new markets include the Middle East, Indonesia, Morocco and China.

 

Healthy economy raises local meat demand
 

The outlook for the Brazilian economy supports higher domestic demand for animal protein in 2008, as consumers' real income is expected to continue to increase in 2008, along with an economic growth near 5 percent, the report said.

 

The report also pointed out that higher feed prices, thanks to ethanol production, may lead to higher feed prices.

 

Feed prices are going to be higher even though Brazil's 2007-08 corn and soy crops are already projected to break record levels, the report said.

 

The Brazilian cattle cycle is beginning an upward price cycle due to the high levels of cow slaughter in recent years. This is also projected to impact packers' profitability and possibly retail beef prices in the next year.

 

The 2.5-percent rise in production is just half of last year's 5-percent growth.

 

In 2007, exports accounted for nearly 17 percent of total beef production, a slightly higher share than in 2006.

 

EU restrictions leading to drop in exports
 

Exports to EU would drop 36 percent by value in 2008, with most coming from prime boneless beef. Processed beef is expected to increase 5 percent.

 

Brazil's beef industry is expected to lose US$50 million a month from the EU restrictions, according to the Brazilian Beef Packers Association.

 

Brazilian beef exports reached another record in 2007, reaching nearly 1.6 million tonnes. Values rose 12 percent compared to 2006, reaching US$4.35 billion.

 

Beef exports to top market Russia increased by 41 percent in 2007. The EU is Brazil's second largest customer for beef. 

 

In 2007, overall beef exports to the EU dropped by 27 percent, mostly frozen boneless beef (less 51 percent), while exports of processed beef increased by 11 percent.

 

Exports to Egypt, the third largest importer of Brazilian beef, fell 11 percent.