February 28, 2020
Rabobank: Brazil beef exports to China expected to fall due to COVID-19
According to a Rabobank report, the COVID-19 outbreak that has caused transport restrictions across China will impact Brazil's beef exports to China in the first half of this year, reported Reuters.
Brazil's food processors benefited from increased demand for meat from China after the African swine fever outbreak, which began in August 2018, decimated China's swine herd.
However, the COVID-19 outbreak in China has threatened to halt Brazil's boosted exports.
Rabobank said China's frozen beef inventory in local markets for use in this year's Lunar New Year celebrations were not used because of the COVID-19 outbreak that forced eateries to close, with some restaurants to remain closed until March.
The report said hotpot and full service restaurants in China will expect lower sales in the first quarter of this year, but quick service restaurants will be least impacted by COVID-19.
Rabobank also said beef demand will fall compared to normal during the first half of 2020 because of lower sales volume, especially as the tourism and food service industries are affected by disruptions caused by COVID-19.
Brazil meat association Abrafrigo said Brazil exported US$7.5 billion worth of beef last year largely due to boosted China demand, with China accounting for 26.6% of the export volume by Brazilian beef packers. The combined volume increases to 45% if Hong Kong is included in calculations.
JBS, Marfig and Minerva are Brazil's top beef export companies.
Rabobank added that the beef industry in Brazil is undergoing a period of supply and demand rebalancing after record exports and prices last year.
Strong beef exports pushed Brazil's domestic prices to record levels, which lowered demand for the meat among local consumers. While production costs dropped as the rainy season in Brazil boosted pasture growth, livestock sent to slaughter was limited.
Rabobank said abattoirs will not pay the high prices to push volumes higher because of Brazil's poor domestic consumption and China's falling prices (due to COVID-19).
Cattle prices in Brazil fell 9.8% from 211.97 BRL (~US$47.25; 1 BRL = US$0.22) per 15 kg in December, according to Rabobank data. This is still 27% higher compared to January last year.
Rabobank noted that rising livestock feed costs are making it difficult for Brazil beef meatpackers too.
- Reuters