November 12, 2007

Brazil's October beef prices hit record

Brazilian beef export prices reached a new record in October, at US$3,083/tonne, posting an increase of 44 percent since October 2005, according to Meat and Livestock Australia.

Brazil has experienced strong domestic and export demand, particularly on the second half of 2006, when export markets such as Russia started lifting its bans on several Brazilian states due to foot-and-mouth-disease in October 2005. High slaughter demand have resulted to a possible reduced cattle supply in the country, especially finished animals - a situation that will probably reduce export supply towards the end of 2007 and early 2008, and lift export prices further. According to the Brazilian National Feedlot Association, high prices of feeder steers and grains are seen to pull down the number of cattle in feedlots by 5.3 percent below the same period in 2006 that will constrain export supplies.

Also contributing to the trend has been the cattle liquidation that started in 2002, accompanied by reduced costs and investment, due to the poor export prospects at the time, but the effects of this have become more apparent recently as demand peaked.

In recent weeks, Brazilian beef exports to Russia have been insignificant, as a result of the strong currency (real) - product has, therefore, been consumed in the more profitable domestic market. At the same time, strong demand from the EU is consuming the majority of Brazil's high value cuts - loin cuts are selling between US$20,000 to US$22,000/tonne FOB (freight-on-board).