December 7, 2007

Brazil's November beef exports drop with new record prices

Brazil's November beef shipments totalled to 99,142 tonnes of unprocessed beef, 6.1 percent less than in October and 18.5 percent less than in November 2006, with average FOB (freight-on-board) prices reaching a new record at US$3,107 per tonne.

According to Meat and Livestock Australia, the fall in exports reflects the low supply of finished steers, a trend since mid 2007 due to high local and export demand, and high slaughter in previous years. Live prices have increased to new records, with Sao Paulo's steer price (Brazil's reference market) already surpassing the Australian trade steer and Korean steer value in US cent liveweight (lwt) terms.

Together with low cattle supply, local demand is strong, as the domestic consumer has increased its purchasing power over recent years and the government subsidises food consumption of the lower segments. Retail domestic prices have also reached record prices in November, and further increases are expected as cattle supply will remain low until December, with high demand until the end of the holiday season in January. If local demand remains strong and continues to absorb price increases, export supply will remain constrained, and average prices will rise further, decreasing Brazilian beef competitiveness.

Rio Grande do Sul, a southern Brazilian state where cattle prices are even higher than in Sao Paulo, will start importing cows and heavy steers from neighbouring Uruguay (both have free with vaccination foot and mouth disease status) for immediate slaughter, with prices between US95-112 cents per kilo lwt. In Uruguay, cattle prices have been decreasing steadily over recent weeks, as spring pastures have increased the supply of finished steers.