Scandal after scandal
Brazil meat sector in serious trouble
The Brazilian meat sector is facing major problems. While pork production is increasing, the country is no longer allowed to export to its biggest customer: Russia. In addition, beef also suffers considerable reputational damage and the largest processor of poultry meat has recently been banned from exporting to Europe.
The USDA (the United States Department of Agriculture) expects the number of pig slaughters in Brazil to increase by 2% to 40,24 million. In line with this, pork production is reportedly increasing by 2,3% to 3,81 million tons. As the Brazilian economy picks up, domestic consumption is likely to rise as well. The volume that will become available for export is likely to increase by 1,8% to 800.000 tons.
Lost a big customer
The shoe pinches at this point, because the Brazilian pig sector lost its best customer at the end of 2017. Because of the discovery of the prohibited growth agent 'ractopamine' Russia bans Brazilian pork. This is also disadvantageous for European and American exporters, because the Russian question swallowed up volumes that Brazil cannot sell in other countries. If Russia continues to ban Brazilian meat, Brazil will want to sell this meat in countries such as China and South Korea.
Of the more than 200.000 tons of pork imported by Russia in 2017, the vast majority (more than 80%) came from Brazil. According to analysts, Brazilian exporters are now in great uncertainty whether, and when, Russia will open the border again. If Russia continues to ban pork, Brazil will have to look for new markets. Only that's not the strongest point of the Brazilians.
Reputational damage beef
Brazilian beef production will increase by 3% this year to 39,89 million animals. The USDA expects the available export volume to increase by as much as 9% to a record 2,03 million tons, well above previous forecasts. If the forecast comes true, Brazil will dislodge India as the largest beef exporter. The only question is whether there are enough outlets for the growing export volume.
The reputation of Brazilian beef has had a deep cut incurred. The meat processors, such as Brasil Food SA (BFR), processed and traded spoiled meat on a large scale last year; also to Europe. The incident caused a stir worldwide, putting Brazilian reliability at risk. The European Union (EU) and China are still barring Brazilian beef from fraudulent slaughterhouses.
Also problems with poultry meat
Moreover, the export of Brazilian poultry meat has also recently encountered problems. Brazilian authorities banned BRF (the largest processor of Brazilian poultry meat) on Friday 15 March (for a minimum of 30 days) from exporting poultry meat to the EU. This is because the company has circumvented the food safety check. The suspension applies to 10 of BRF's 35 locations.
In 2017, BRF (also from other countries) said it shipped about 278.000 tons of poultry meat to Europe. Analysts expect the suspension to affect less than 5% of total sales volume. Yet the boycott is undesirable, because the reputational damage of the company is already very fragile. The news caused BRF's share to drop to its lowest level since 2011. Later, the price recovered somewhat.
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2018 is going to be difficult
As the cards are now shuffled, 2018 will be a difficult export year for the Brazilian meat sector. Both for cattle and pork, while poultry meat is now also under scrutiny. If the Brazilian meat sector does not get its affairs in order quickly, there is the prospect of permanent export damage.
DCA Knowledge Session
Come to a knowledge session in Arnhem on Monday evening, March 26, about the DCA BestPigletPrice and the DCA Beursprijs 2.0. During this evening, Jean-Marie van Oort (director Topigs Norsvin) will speak about trends in genetics, among other things. Edwin Burgers (director DCA Group) is in charge of this evening. Sign up here.
Wouter Job
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