March 20, 2009

The credit crunch and slowdown in world demand have affected the Brazilian beef industry, with the fifth-largest processor Independencia filing for bankruptcy.

Brazil's beef exports fell for the first time in a decade in 2008, and shipments are expected to decline further this year to 2.08 million tonnes.

The national cattle herd is also not expected to recover to its peak of 180 million head in 2007 before mid-2010.

Brazil's December meat exports decreased 20 percent from August, with beef and pork declining 30 percent and 35 percent, respectively.

Beef exports have dropped 45 percent on-year, the Brazilian Beef Exporters Association said.

However, improvements in the economy have fuelled domestic beef consumption, which grew 5.5 percent in 2008 and is projected to grow by another 4 percent this year.

The slowing exports have a severe impact on beef processors which had incurred significant borrowing for overseas expansion. Beef processor Arante failed to pay interest payments on US$150 million borrowed from international markets, while Brazil's No. 2 beef exporter Bertin could be next, according to debt ratings.

Sadia and Perdigao have announced permanent or temporary layoffs of thousands of workers, and the slump in world demand has left Sadia relying on capital injection or asset sales due to its negative cash flow and a total debt of 5.4 billion Brazilian reals, or US$2.38 billion.

But JBS, Brazil and the world's leading beef processor, intends to boost production and hire up to 5,000 new employees in the first half of 2009, as it looks to grab the world market share that its rivals are forced to relinquish.