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Brazil, Australia and the Global Beef Supply

14 April 2008

BRAZIL - The CEO of one of Brazil’s largest beef processing companies sees global beef demand continuing to increase with Australia well positioned to meet this growth. Brazil has positioned itself as the world newest beef powerhouse.

With a national herd of 210 million head and growing - Brazil can not be ignored. But according to Fernando Galletti de Queiroz, chief executive officer of Minerva, the fourth largest meat processor and third largest exporter in Brazil - there is plenty of marketshare to go around.

Mr Queiroz was recently brought to Australia by Rabobank, to provide Australian beef producers with a first hand knowledge of trends in the Brazilian beef industry.

During his seven day visit Mr Queiroz was the guest speaker at presentations in several states with a number of leading beef producers present.

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Mark Bennett, Rabobank State Manager for Victoria and Tasmania, said they were pleased to be able to bring visiting experts like Mr Queirzo to Australia.

“One of the best ways to manage change is through knowledge. Through Fernando’s presentations, we have been able to explore how Brazil operates first hand, which has been extremely valuable to us and to the beef producers that attended our forums,” Mr Bennett said.

Mr Queiroz’s message to Australian producers was clear - the days of cheap food are over and the world will depend on countries like Brazil and Australia to meet that demand.

“I believe the world can pay higher prices for things like beef, chicken, and pork, it is already happening,” he said.

“There will be a lot more volatility, but suppliers of food will have much more power then we had before.”

Brazil currently produces 18 per cent of the worlds’ beef, consuming domestically nearly 80 per cent of its current production Mr Queiroz said in Brazil beef is the preferred source of protein over chicken and pork, which are both cheaper.

He said increased domestic consumption has been driven by higher economic growth and this scenario is happening world wide. “Consumption is booming in lower social classes globally and that is the consumer Brazil is targeting,” he said.

Brazil boasts the largest and fastest growing commercial herd in the world and is expanding beef exports in both the fresh and frozen market. “Since 2003 the Brazilian herd has grown by nearly 15 million head,” he said.

“On top of this we have 394 million ha available and we are currently only using 68 million ha. There is a lot of potential. There is a big shift to the north and wherever the cattle go the industry follows.”

Brazil’s increase in production has also been matched by improvements in genetics and the fact they do not rely on just one product.

Mr Queiroz said most farms grow two to three crops - a combination of soybeans and cattle or cattle, corn and sugar cane giving the farmer much more flexibility.

“The majority of our cattle are on grass feed so we are not impacted directly by grain prices. If grain prices are going up that is good for Brazil as it widens the gap between our grass fed and other countries grainfed beef,” Mr Queiroz said.

“We also have minimal labour costs with the average farm worker only averaging about $200 to $250 USDA per month. In addition we have a very good climate with an average rainfall of 1500 millimetres per year which means we can run an average of 1 head per ha up to 11 head per ha.”

Brazil is also becoming a significant player in live cattle trade. While a relatively new industry Mr Queiroz admits they are benchmarking themselves on Australia’s live cattle industry.

“We can still use older vessels, but that is under discussion, we are raising our standards in live exports, but our main challenge remains the transport of the animals.”

About 80 per cent of the Brazilian herd are Bos Indicus Brahman and Nelore which are a Zebu Bos indicus cross. They also have been crossing Nelore with Angus and Blonde Aquitaine breeds.

“Nelore adapt better to north Brazil which is closer to the equator, where in the south they tend to use more cross breeds,” he said, adding that farms are also retaining cows now to build herds.

Brazils key export markets are the European Union, Russia, Egypt and the Middle East.

It does not have access to most of Australia’s traditional markets like Japan, Korea, Mexico, Canada or USA despite the fact that it supplies one third of the world beef exports.

And to have any chance of ever accessing these markets Mr Queiroz said Brazil must improve its sanitary status.

“A big problem for us is that we are part of a big continent and there have been outbreaks of Foot and Mouth Disease (FMD) on our borders,” he said.

“We can’t control our neighbours so Brazil has decided to help eradicate FMD by donating vaccine to neighbouring countries. This will be better for us. It will be difficult or us to access other markets unless we eradicate this disease from the whole continent,” he said.

Going forward Mr Queiroz believes Australia and Brazil can share their experience.

“The time of cheap food is gone forever and we are in the business of the future the world needs us and we are ready.”

TheCattleSite News Desk



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