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Brazilian Competitiveness Fades

20 November 2009
Meat & Livestock Australia

AUSTRALIA - Brazilian beef export competitiveness has weakened over recent years, driven by a number of factors – including rising production costs, diminishing land availability for cattle raising and the appreciation of the local currency, the real, against other major currencies - most noticeable the US$.

Lower beef production, subdued beef demand in international markets, a cut in access to the EU market and limited scope for export diversification (due to access issues) when compared to competitors such as Australia, have combined to cause a 31 per cent fall in the value of Brazil’s beef exports in the first nine months of 2009 (a 16 per cent fall in volume). In addition, rising domestic consumption has made the price differential between export prices and domestic wholesale prices smaller, making the local market a better option for struggling meatpackers.

Cattle prices have averaged 15 per cent lower this year than in 2008 (in local currency terms), as a direct result of the lower profitability in export markets. However, they are still 21 per cent higher than in 2007, when supply commenced to decrease.

According to Meat and Livestock Australia the outlook for the Brazilian beef industry remains uncertain, as cattle supplies are not expected to rise until 2010 or 2011 after the herd liquidation, which commenced in the mid 2000s, and the real seems destined to remain dear, as government efforts to decrease US$ inflows (such as a 2 per cent tax on foreign financial asset investments) have proved to have limited effect.

TheCattleSite News Desk



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