Brazil's beef export business losing steam

The competitiveness of Brazil's beef exports has weakened over recent years due to rising production costs, less available land for cattle raising and the appreciation of the Brazilian real against major currencies.

Brazil's beef exports in the first nine months of 2009 fell 16 percent in volume. The cut was attributed to lower beef production, weaker beef demand in world markets, reduced access to the EU market and limited export destinations compared to competitors such as Australia.

Rising domestic beef consumption has also closed the gap on export prices and domestic wholesale prices, boosting the attractiveness of the local market to struggling meatpackers.

Cattle prices averaged 15-percent lower this year than in 2008 as a direct result of the lower profitability in export markets. However, they are still 21-percent higher than in 2007.

The outlook for Brazil's beef industry remains uncertain. Cattle supplies are not expected to increase until 2010 or 2011 after the herd liquidation, and the Brazilian real may remain strong as government efforts to increase US dollar inflows have limited effect.