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CME: US to Receive First Beef Exports from Brazil

22 September 2016

US - Media has reported that several beef producing facilities in Brazil have been approved to export fresh beef to the US, according to the latest CME Daily Livestock Report from Steiner Consulting Group.

While we have heard this report from several sources, we have yet to be able to confirm it with USDA’s Food Safety Inspection Service as it is not updated on their website at the time of publishing this DLR nor could we get hold of anyone on the phone.

According to reports, three main international beef producing companies who have plants in Brazil; JBS, Marfrig, and Minerva, have all had individual Brazil units (plants) approved for export to the US.

JBS has 4 units approved, and reported the first batch of fresh beef will be shipped to the US this weekend. Marfrig has 6 units approved for export and said it has already shipped its first container of fresh beef to the US, and Minerva had 2 units approved for exporting.

To recap, on August 1st, the USDA announced the reopening of fresh beef trade with Brazil. At the time of announcement no specific plant in Brazil had approval, but the announcement jump-started the plant specific approval process.

While this market is now open and operating, we do not expect a major influx of Brazilian beef into the US in the short run, mainly due to Tariff Rate Quotas (TRQ’s) and Brazil’s foothold in other major markets.

To review, TRQ’s are assigned to countries exporting product to the US, who do not have a free trade agreement with us. The total TRQ for beef from countries without a free trade agreement or specific quota with the US (defined as “Other Countries”) is 64,805 metric tons, and is used on a first-come-first-served basis.

Brazil falls into this “Other” category. Once the quota is reached, any beef exported to the US from “Other” countries, over the maximum amount, is subject to a 26.4 per cent ad valorem tax.

Last year, 68 per cent of the 64,805 mt (142 million pounds product weight) quota was filled, primarily by Nicaragua, Honduras, Costa Rica, and Ireland. This TRQ, along with the market share Brazil holds in Chinese and Russian beef imports, leads us to believe that relatively small levels of beef will be imported from Brazil at least for the first couple years.

According to USDA’s Global Agricultural Information Network (GAIN), the recent report on Brazil’s 2016 Annual Livestock situation compiled by USDA staff in country, notes they expect Brazil to fill about 80 per cent of the 64,805 mt quota in 2017.

Note, the graph shows that even if Brazil filled 80 per cent of the quota, it would pale in comparison to the volume of beef we import from our main international sources.

Brazil hosts an impressive cattle and beef industry. According to the GAIN report, Brazilian total beef cow inventory numbers were at 54 million head in 2015 and 55 million head in 2016. That is compared to the US beef cow herd at 29 million head in 2015 and 30 million head in 2016.

In Brazil, beef production, on a carcass weight equivalent (cwe), totalled 9,425,000 mt (20.8 billion pounds) in 2015 and is forecast at 9,620,000 mt cwe (21.2 billion pounds) in 2016, Almost 20 per cent of their production goes to the export markets.

This is compared to US beef production which totalled 23.7 billion pounds cwe in 2015 and is estimated at 24.8 billion pounds cwe in 2017.

Brazilian cattle are generally smaller framed than in the US. Additionally, cattle in Brazil are largely finished on grass based pasture systems.

The report describes the expected increase in Brazilian beef production into 2017 is underpinned by higher exports, mostly to Asian markets, along with a small increased in domestic demand due to a recovering economy. However, the report cautions that cattle producers and packers remain concerned with the price uncertainty of feed costs, along with the volatility of the exchange rate, as main factors that could affect margins.

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

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