Brazil’s cattle sector expects beef bans to be removed after a year of export restrictions by 56 nations, and this will force competing countries to lower prices as more beef volume becomes available, analysts said.
Last week, Israel removed its ban on beef from Mato Grosso do Sul, home to Brazil’s largest cattle herd. Beef is the top item Israel imports from Brazil, hitting 27,995 tons between January and September, up 88% over the same period last year, according to Brazil’s Trade Ministry. Israel is the first country to remove beef bans on Mato Grosso do Sul, and that’s significant, the Brazilian Beef Exporters Association, Abiec, said, because the state was the focus of a major outbreak of foot-and-mouth disease in October 2005.
Once that outbreak was reported, 56 nations quickly moved to ban beef from Mato Grosso do Sul and neighboring states Parana and Sao Paulo. The move essentially closed a major transit route for Brazil’s beef exports.
Not only is Mato Grosso do Sul the country’s biggest beef supplier, but Sao Paulo is the country’s No. 1 beef exporter. Sao Paulo cattle did not get foot-and-mouth disease, but four ranching towns in neighboring Parana did. Some countries put nationwide bans on Brazilian beef, but most countries stuck to Mato Grosso do Sul, Parana and Sao Paulo.
With Israel moving to lift a ban on Mato Grosso do Sul, Antonio Jorge Camardelli, Abiec’s executive director, said he expects European nations will follow suit in the near term.
“European markets will start to gradually open, there is no doubt about that,” Camardelli said while attending the SIAL 2006 food exhibition in Paris.
As a trade union, the EU is Brazil’s No. 1 beef export market. Russia is the No. 1 individual importer of Brazilian beef.
The gradual opening of the three states to world beef markets will mean more beef available to export. International food safety standards set by the World Organization for Animal Health require a period of at least six months after the last cattle was culled in foot-and-mouth infected regions before that state’s beef can be considered safe for export.
“I doubt Brazilian beef prices will fall, but when these states see their bans removed one by one—and that day is coming—then competing countries will likely feel the pricing pressures and have to lower their beef prices,” said Jose Vicente Ferraz, director of consulting firm Institute FNP.
Ferraz said that restrictions on beef exports in Argentina, and drought in Australia has caused a reduction in global beef supply.
“The US has problems with mad cow disease. The EU used to be a net exporter, but now imports more beef than it exports. The remaining big player is Brazil. Where else you going to go at this point if you need to import beef,” Ferraz said.
Ferraz said Brazil beef exports should rise 15% to 2 million metric tons on a carcass equivalent basis in 2006 then to 2.2 million tons in 2007.
Brazil exported 106,100 tons of fresh beef in September, up from 93,800 tons in September 2005, but down from the 128,800 tons in August.
Brazil is the world’s leading beef exporter. With low production costs such as animal feed, Brazil’s biggest obstacle to growth is animal health and the perception, especially in the E.U., that Brazilian animal safety standards are lackluster. Foot-and-mouth disease has therefore become the sector’s top concern.
No new cases of the disease have been reported this year, but some analysts say the disease is tough to control, even with vaccines, because cattle live in close proximity to wildlife that can easily transmit the virus to healthy bovines.
Nevertheless, exports managed to rise this year even with export restrictions. “Unless there is an economic recession worldwide then I would think that even with foot-and-mouth disease, Brazil will still break export records next year,” Ferraz said. (Dow Jones)