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May 31, 2017
 
India sabotages its own beef and cattle trade
 
The enactment and subsequent temporary suspension of new cattle trading laws threatens Indian beef and cattle's existence -and could profoundly upset the world market for this red meat.
 
By ERIC J. BROOKS
 
An eFeedLink Hot Topic
 
 
Having already halted the industry's growth after 2014, late May saw India's government pass a law that brought chaos to its beef sector and could profoundly impact the world market. It slapped a nation-wide ban on the sale and purchase of cows, bulls, bullocks, calves, buffaloes and even camels intended for slaughter from livestock markets.

Such animals can now only be purchased for 'agricultural purposes' (eg. dairy farming) and not for slaughter. The official government statement said, "No person shall bring a cattle to an animal market unless upon arrival he has furnished a written declaration signed by the owner of the cattle -stating the name and address of the owner of the cattle, with a copy of the photo identification proof. Giving details of the identification of the cattle and stating that the cattle has not been brought to market for sale for slaughter." All parties to such livestock market transaction must also sign an official statement that cattle are being bought or sold for non-slaughtering agricultural purposes.
 
Opposition to the law quickly mounted, with Muslim majority Indian states demanding that the ban be rescinded and challenging the law within court. Kerala and Tamil Nadhu state residents protested by holding public beef eating 'festivals'. Western Bengal state in the country's north and southern India's Kerala state both gave notice that they would ignore the ban.
 
On May 30th in Tamil Nadu State, the Madras High Court suspended the new law for four weeks. In an interview with AFP, plaintiff lawyer Ajmal Khan stated that, "The court ruled that the order be put in abeyance for four weeks and asked the central and state governments to reply to the petition filed by my client."
 
During this month when the new law is being suspended, industry associations and several Indian states will mount their own legal challenges. After bringing Indian cattle slaughtering and beef production to a near standstill, normal operations can resume for a few weeks -but no one knows what the situation will be after the end of June.
 
Sagari Ramadas, a livestock and dairy researcher with India's Food Sovereignty Alliance stated that when combined with earlier measures, the new law amounted to, "A countrywide ban on the slaughter of cattle and buffalo, and the consumption of beef."
 
Noting that a large proportion of farmers rely on livestock markets to cut their losses on older cattle, All India Meat and Livestock Exporters Association spokesman Fauzan Alavi explained that, "It is the unproductive cattle, which arrives in large number for sale in these markets, as their [economic] feasibility virtually ceases to exist, while the per day maintenance cost goes up."
 
Industry sources warn that if this new ban on the trade of cattle for slaughter is not overturned, it threatens nearly two million tonnes of annual beef exports valued at US$4 billion. Aside from putting several million Indians out of work, it could leave an already tight world beef market short of up to half a  million tonnes of beef in the latter part of this year. It could also profoundly increase the number of abandoned stray cattle which roam Indian cities, which is estimated at 5.4 million head.
 
For the world's leading beef exporting nation, this is the latest blow to an industry already reeling from an escalating number of legal restrictions and a rising number of violent, sometimes deadly attacks. -But this is different: Unlike the state slaughtering bans and bans on transporting beef or cattle enacted since 2014, this regulation could bring India's beef production to near zero.
 
In a May 29th 2017 interview with Reuters, Abdul Faheem Qureshi, head of the Muslim All India Jamiatul Quresh Action Committee warned that, "Meat supplies will very soon grind to a halt in India and abroad if either the government does not repeal this draconian order or a court does not step in." Qureshi added that, "Exports will come to a halt because slaughterhouses will find it extremely difficult to buy cattle. We also apprehend widespread job losses in the sector, which supports millions of people."
 
According to Priya Sud, a partner at Uttar Pradesh state-based Al Noor Exports, if the new law is not revoked or modified, the supply of beef available for export will dry up within two months. With India supplying 20% of all beef exports, the implication is clear: If this new law's temporary suspension is not made permanent, it could leave the world beef market short of several hundred thousand tonnes of beef by the fourth quarter of this year.

While this new law could single-handedly derail the world's biggest beef exporter, India's troubles began in May 2014, when prime minister Narendra Modi took power. Within months of taking office, many states that elected Modi's Bharatiya Janata Party (BJP) passed laws banning the slaughter of not just cattle but even buffaloes. Over the next two years, six states banned the slaughter of cattle, and five of them now impose maximum 10-year jail sentences for doing so.
 
Moreover, this wave of new laws expanded both new and pre-existing cattle slaughtering bans to include bulls and bullocks. -That profoundly reduces the supply of male cattle, which previously enabled meat processors to boost beef exports despite stagnant inventories.
 
For example, in the ten years prior to Modi taking power, annual beef output increased by more than 7% and exports by over 25%: This happened even though the country's inventory of 190 million cattle and 110 million buffaloes stayed roughly constant, varying by less than 1% in the years after 2008.
 
From 2004 through 2014, the quadrupling of exports from 0.492 million tonnes to 2.082 million tonnes inventories was made possible by male slaughter rates, which skyrocketed to meet booming export demand. Consequently, even though cattle production has risen at a 1.8% annual rate since 2010, male bovine inventories have fallen 4% annually.
 
This enabled India's beef exports to grow rapidly while keeping the total number of cattle and buffalo constant. In the six years before Modi was elected, output rose by more than 7% annually while exports increased at a 25%+ pace. -Unfortunately, after 2014, with a rising number of Indian states banning the slaughter of both male cattle and buffalos, it became impossible to meet rising export demand in this way.
 
To make matters even worse, states with large Hindu majority populations passed harsh criminal penalties, punishing anyone caught eating beef or even transporting beef or cattle with multi-year jail sentences, heavy fines, or both.  Previously, farmers in regions that banned slaughtering could at least transport their cattle or buffalo to states where beef processing was still legal.
 
Coinciding with these bans on cattle slaughtering or their transport to states where it was still allowed, new restrictions on beef's transport or consumption made it impossible for farmers to raise cattle for beef in many parts of India. To make matters worse, over a dozen people have been killed and countless others injured by vigilante mobs that increasingly attack cattle farmers and traders.
 
Not surprisingly, a widening gap between India's actual and expected beef output and exports opened after 2014, when all these restrictions on beef and cattle were enacted. At first, the impact was immaterial: In 2014 when Modi took power, beef output totaled 4.10 million tonnes instead of the 4.15 million initially projected by the USDA. At 2.082 million tonnes, 2014's record export volume was close its 2.20 million tonne estimate.
 
In 2015, state cattle slaughter bans, transport restrictions and beef's criminalization began to constrain the supply of exportable Indian beef. This occurred just as a 50% drop in Brazil's currency made its beef highly price competitive.
 
As a result, instead of rising to the 4.50 million tonne initial USDA estimate, 2015 production stayed flat at 4.10 million tonnes. Similarly, rather than increasing to a USDA projected 2.4 million tonnes (which was later revised down to 2 million tonnes), 2015 beef exports plunged a steep 13.3%, to 1.806 million tonnes.
 
By 2016, with a growing number of states banning cattle slaughter, transport and beef consumption, even the more conservative forecasts proved too optimistic. The USDA had already cut its initial 2016 Indian beef output estimate of 4.7 million tonnes back to 4.30 million tonnes and later 4.25 million. Instead Indian beef production only managed to increase 2.4%, to 4.20 million tonnes.
 
Exports fared even worse. Instead of rising into the 2.5 million tonne range by 2015 as had been commonly expected a few years earlier, 2016 exports sank back 2.3%, to 1.764 million tonnes. That was the lowest volume of beef exported since 2012 and 15.3% below its 2014 peak.
 
Amid all this uncertainty, India will fall short of 2017's output forecast of 4.25 million tonnes of beef output and 1.85 million tonnes of exports: The only question is 'by how much'?
 
Even if this new law is overturned, India could still lose nearly a month's worth of beef production. At the very least, 2017 beef output will fall to an eFeedLink estimated 4.0 million tonnes while exports drop to approximately 1.5 million tonnes. On the other hand, should the new law becomes permanent, India will suffer a far steeper decline in beef output and exports -and a supply vacuum will open up in the world beef market.
 
Even without this new restriction on cattle trading, existing, post-2014 legal restrictions on cattle slaughtering and transport have broken Indian beef's export momentum. Based on USDA estimates made prior to the introduction of this new law, Indian beef production grew by over 7% annually in the six years ending in 2014. 
 
In the three years since Modi's election, has only increased 1.2% annually in the three years since he was elected. Based on pre-crisis USDA estimates, exports went from growing at 24% annually in 2008-11 and 32% in 2011-4 to rates to falling at a 3.9% annual rate during 2014-17. Should Indian beef output and exports fall by even the modest amount estimated by eFeedLink, the years 2014-17 will have seen India's beef output fall by 0.8% annually and exports drop by 10.4% annually.
 
The primary beneficiary of the Modi government's political interference will be Brazil: It has the cheapest beef after India. Buyers in the Middle East and Southeast Asia will happily substitute Brazilian beef in place of India's should the latter become unavailable. It also implies that Brazil will soon take over India as the world's largest beef exporter.
 
At this point, the only question is whether India will give its beef exporting crown to Brazil gracefully, or whether the Modi government will cause the country's beef production to nosedive by a million tonnes or more. The latter would cause a large inflation in red meat prices and a realignment of the world beef and cattle sectors.
 


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