September 17, 2007

 

Brazil's Amazon beef ready for world market

 

 

Sooner rather than later, Amazon-raised beef might be what's for dinner in Europe, Russia and dozens of other nations that buy Brazilian beef.

 

After the World Organization for Animal Health, or OIE, gave Brazil's Para state a clean bill of health in its fight against foot-and-mouth disease on May 22, the giant Amazon state of Para has been looked upon as the next big thing for Brazil's mega beef corporations. OIE recognized the southern half of Para as free of foot-and-mouth disease with vaccine, making it much harder for nations to argue that the region's beef represents a potential health hazard to consumers.

 

"All of Brazil's major meatpackers are expected to migrate to the Amazon region," said Jose Vicente Ferraz, director of Instituto FNP, a agribusiness consultancy.

 

While other important beef exporters, especially Brazilian rivals in the UK, are reeling from their own bouts with foot-and-mouth disease, Brazil's meat companies seem to be basking in eternal sunshine. Its last case of the virus occurred in late 2005. Beef exports are expected to break records again this year.

 

Para state is located smack dab in the heart of the Amazon biome. While a quick glance at a map will have most people envisioning cattle roaming primeval jungle, most of the cattle ranches are in the southeast, in areas long deforested. Brazil beef exporters, with eyes on the global market they currently dominate, are either moving into this area or upgrading relatively small operations when compared to their facilities in Sao Paulo.

 

Minerva and Mercosul are planning to enter the Para market with the construction of new plants in early 2008, said Paulo Costa, president of Sindicarne, a Para state meat packers union.

 

Minerva, one of Brazil's top five meat packing companies, said Friday that it was investing 70 million Brazilian reals (US$37.03 million) to build a new facility in Para, expected to be up and running early in 2008.

 

"The OIE decision was just a plus for us," said Carlos Watanabe, investor relations director of Minerva.

 

"We figured that south Para would eventually get approved as free of foot and mouth disease and in this case, more nations will come to accept beef coming from here," Watanabe said.

 

Bertin, the second largest meat packer in Brazil behind the JBS Friboi Group, was awarded a US$90 million World Bank loan in March to upgrade its facility in Maraba, along the Tocantins River in Para.

 

Despite the notoriety of the region, Bertin Chief Financial Officer, Douglas Oliveira, said that the company was counting on getting the green light from OIE to ship beef out of the Amazon River to Belem and across the Atlantic Ocean to consumers in Europe, Asia, North Africa and, increasingly, the Middle East.

 

Para currently has 29 fully functioning meatpacking plants, and three more in initial planning stages, according to the Para Agricultural Federation, a local farm trade group.

 

Analysts say that the OIE decision is key to further market expansion. With expensive land, and competition from sugarcane and other crops in the main ranching states, Para is the new frontier.

 

"In the next 50 years, we should see cattle ranching concentrated in Brazil's north region," said Alcides Torres, director of a Sao Paulo meat market consulting firm called Scot Consultoria.

 

Environmentalists fear that as demand rises from new meat companies, smaller ranchers will deforest to make way for bigger herds to sell. That could prove troublesome for Brazilian beef, already the target of animal health campaigns in the UK

 

The Brazilian Beef Exporters' Association, Abiec, says European consumers are mainly concerned about the possibility of foot-and-mouth disease in Brazilian cattle. But environmental concerns, such as the possibility of further deforestation, also comes into play.

 

The OIE decision has put beef companies in an "export euphoria," said Joao Meirelles, director of the Amazon conservation group, the Peabiru Institute. He said long-term consequences of Para beef expansion are being ignored.

 

"Cattle farming is the number one problem in the Amazon," he said.

 

"Deforestation has not stopped, as the cattle industry would have us think, and effects will continue to be disastrous," he said.

 

The Brazilian government said this month that cattle were the leading cause of deforestation in the Amazon.

 

Meirelles also maintains that meatpackers in Para operate illegally in one aspect or another, due to insufficient government oversight in the state.

 

"They have tax problems, slave-labor problems and deforestation issues, for which they are rarely fined," he said.

 

Roberto Waack, director of Ares, a sustainable agriculture think tank mostly working with the soy industry, said in a recent interview that Para, "was sort of like the Wild West. It needs more government oversight so maybe these big companies moving in there will actually do some good in the end."

 

Nevertheless, Para's newfound attraction is obvious. Beef costs are 25 percent less than they are in the major ranching states like Mato Grosso do Sul. Another factor is its location, allowing for exports out of Brazil's northeast rather than the traditional central-south route through Sao Paulo, ultimately lowering shipping costs and providing quicker access to Europe.

 

OIE's position on Para doesn't mean Europe or Russia, Brazil's top two markets, will start importing beef made from Amazon cattle anytime soon. Animal and food safety specialists from those nations will have to visit Para state meat packers and grant them permission to enter those markets.

 

But with known entities like Bertin and Minerva in town, it's more likely that Para beef will be shipped overseas as soon as next year, analyst suspect.