July 18, 2011

 

Brazil no longer cheapest provider of global beef

 

 

Brazil's role as a provider of cheap beef to the world appears to be over, analysts at Rabobank have said.

 

The agricultural finance specialist has also said in a research report on Brazil's cattle industry that the world will have to pay a higher price for beef if global production is to be stimulated and supply concerns addressed.

 

Authors Wendy Voss and Guilherme Melo said the growth in Brazil's beef industry from a relatively minor player to a global giant over the last three decades was nothing short of incredible.

 

Investment in the supply chain, government support for research and development and a cash injection in land and productivity improvements had all benefited the sector.

 

They stated: "These investments have made Brazil a force to be reckoned with, establishing a reputation as a low-cost supplier of beef around the world."

 

But the pair added: "However, the days of cheap and widely available Brazilian beef appear to be over, with competition for resources from other commodities, increased environmental scrutiny and restrictions, higher land prices, and higher input costs. Brazilian cattle prices are likely to remain at above-historical levels, albeit with likely fluctuation patterns in the cattle price sector."

 

Brazil has the world's second largest cattle herd after India. It is the world's biggest beef exporter, having overtaken Australia and the US.

 

But an ever increasing amount of its supplies is likely to be eaten locally. Domestic demand already accounts for 80% of production. The bulk of a 1% increase in production forecast for this year is expected to go to domestic markets, where per capita consumption has in recent years risen 3kg to 37kg annually.

 

That increase in Brazil comes at a time when beef supplies elsewhere are expected to fall, with the output from the EU, US, China and Argentina showing declines this year.

 

Beef cattle numbers in the US are at their lowest level since 1963, although increasing carcase weights have offset the fall. US prices are at record levels and are expected to climb until at least 2014. Argentina has lost its crown as a beef giant as its herd has plummeted seven million head in the last five years due to drought, a shift into soy production and intermittent export restrictions. It will take at least until 2018 for its herd to return to the numbers seen in 2006.

 

Australia's herd is down to 1.6 million.

 

Rabobank said increased environmental scrutiny is likely to have an impact on Brazil's cattle sector, particularly its expansion into the north of the country where it has been blamed for deforestation. Fourteen Brazilian processors have recently been fined EUR729 million (US$1 billion) for buying cattle from farms in the Amazon which illegally exploit deforested areas or slave labour.

 

The report said there was no obvious successor to Brazilian's crown for beef production.

 

It added: "So as demand for meat in developing markets continues to rise and the demand in developed markets recovers, the world will need to pay higher beef prices to stimulate global beef supply."

 

New figures, meanwhile, show an 11% fall in Brazilian beef and veal exports in the first quarter of the year to 198,400 tonnes, down from 221,500 at the same point in 2010.

 

Russia was the biggest buyer at 67,300 tonnes, followed by Iran at 40,700 tonnes, and Venezuela at 16,800 tonnes. The EU bought 8,000 tonnes, of which Italy was the biggest market at 3,300 tonnes, and the Netherlands next at 2,200 tonnes.