South America Calling

Brazilian Beef Exports Surge

Brazilian beef exports have been surging in recent months following a devaluation of the Brazilian real, increased access to the Chinese market and greater availability due to declining domestic demand.

And there is room to continue growing if, as expected, the U.S. opens its doors to Brazilian fresh beef in mid-2016, said Rabobank in a research report.

In the first two months of 2015, Brazilian beef shipments rose 13% compared with the same period of 2015.

A devaluation of the real, which fell a third against the dollar in 2015 before coming back more recently, has made Brazilian beef very competitive internationally.

At the same time, a decline in consumption caused by the country's economic woes means Brazil has more product available, Rabobank noted.

Brazil is in the middle of an economic slowdown the likes of which nobody has ever seen. The economy contracted 3.8% in 2015 and may shrink similarly in 2016.

But local beef prices aren't falling. Increased retention of cows over the last half-year has sustained prices, with higher calf availability only resulting in greater beef production in 2017.

So, the result of less purchasing power and the maintenance of prices is lower domestic consumption.

At the same time, Brazil has increased its access to the Chinese market. In February, the Agriculture Ministry announced that five more beef plants had been approved to export to China, bringing the sum total to 16.

Rabobank estimates that Brazil will double shipments to China in 2016 to 200,000 metric tons (mt), making it the leading exporter to that country.

Meanwhile, Brazil's Agriculture Ministry anticipates the first fresh beef shipment will leave for the U.S. in the first half of 2016. Brazil would have to compete for a limited duty-free quota of 65,000 metric tons, but it could compete in the open market, despite a 25% import tariff, if the Brazilian real falls below R$4 to the dollar, which it has slipped to on a couple of occasions in recent months.

Access to the U.S. market has an importance beyond American borders as a number of other countries base approval for imports on U.S. decisions, Rabobank noted.

Brazil has one of the world's largest commercial herds and has been pushing to increase productivity in recent years as grain production moves onto pasture.

The sum total of all this is that beef exports are set to increase an estimated 11% in 2016.



To comment, please Log In or Join our Community .