September 8, 2010

 

Brazil's meat and livestock sector face tensions

 

 

Tensions are heating up within Brazil's meat and livestock industry over cattle exports at a time of competition for supplies, and over the increasing dominance of Brazil's top two beef giants.

 

Meat packers and shippers in the world's biggest beef exporting country are condemning cattle merchants for raising foreign sales of live cattle during a period of lower availability of cattle for slaughter, the USDA's Sao Paolo bureau said.

 

The bureau lifted to 625,000 animals its forecast for Brazil's cattle exports this year, 35,000 more than the USDA is currently factoring in, and a 95,000-head rise year on year.

 

However, the office flagged the lower availability of finished cattle for slaughter, after several years of intense cow culling - with the squeeze on supplies exacerbated by a reluctance by livestock farmers to invest following a wave of bankruptcies among meat packers two years ago.

 

The bureau noted that the situation was aggravated by the lack of payment by some packers which filed a bankruptcy procedure to stall payment to producers, estimating that 15 medium-sized packers were operating under court-approved bankruptcy plans.

 

Many others, however, have been purchased by the country's two meat-packing giants, JBS and Marfrig, leading to a market concentration which cattle farmers claim has cut competition from animals, so undermining prices.

 

Livestock producers have aimed much of their anger at the Brazil's state development bank, BNDES, which owns more than 11% of Marfrig and 18% of JBS, according to records, and has been seen as encouraging the groups' expansion.

 

Marfrig in June unveiled its 38th takeover in three years, albeit this time of a US-based meat supplier, Keystone.

 

The bureau's revelation came as it cut its estimate for Brazil's beef exports this year to 1.68 million tonnes, 150,000 tonnes below the official USDA estimate, following a cut in shipments to America following findings of residues in meat of Ivermectin, an anti-worm drug.

 

Beef exports to the US near-halved to 13,500 tonnes in the first half of the year. Shipments to Russia, Brazil's top export market, were also lower, down 14.3% at 131,100 tonnes.

 

However, rising prices had helped a strong rise in the value of shipments.

 

Exports were, by weight, expected to rebound 8.1% to 1.81 million tonnes in 2011, thanks to the opening of markets such as Chile and Indonesia, and increasing progress in registering farms as suitable to export to the EU.