Implications Of Interruption In Brazilian Beef Flow To EU
European Union/Brazil
Implications Of Interruption In Brazilian Beef Flow To EU
Brazil’s Troubles Could Profoundly Affect the EU Market In 2008
Now that Brazilian beef exports to the European Union (EU) are halted, USMEF is looking at three potential scenarios in the coming months, two of which could present significant opportunities to the U.S. beef industry.
USMEF expects that the EU and Brazil will eventually agree to a compromise list of 300-700 Brazilian farms approved to export to the community. The most optimistic scenario for Brazil would allow EU vets to audit the farms this month and next, with the first shipments leaving Brazil as soon as March -- almost before the last shipment of goods certified under the current system (pre-January 31) has arrived.
If the approved list is initially only 300 farms, Brazilian slaughterhouses that are mandated to slaughter only animals eligible for the EU probably will have difficulty sourcing the roughly 1,000 head per day they need to operate at minimum capacity until the number of farms increases. In this scenario, a significant shortfall in Brazilian shipments to the EU could last for six months until enough farms are approved to supply the slaughterhouses.
It is also possible that EU auditors, who are set to travel to Brazil later this month, could uncover deficiencies that result in an outright ban on Brazilian beef.
In the case of either the initial approval of only 300 Brazilian farms, or an outright ban on Brazilian beef, 2008 should provide an opportunity for increased U.S. beef exports. Due to the uncertainty created by the EU’s new restrictions on imports from Brazil, U.S. beef is now closer in price to South American beef than ever before , although available supply is limited by the EU hormone ban and EU quotas.
Prices for Brazilian and Argentinean beef have surged and EU importers are scrambling to find other sources of supply. EU producers, especially in Ireland and Britain,, are looking forward to higher prices. They have already been holding back cattle in anticipation. While the EU market remains closed or restricted, Brazil is likely to redirect its beef exports to other markets such as Hong Kong, the Middle East, Russia, Venezuela, the Philippines and other South American countries.
USMEF’s office in Brussels reports different parts of the market are affected in different ways:
High quality Brazilian end rump and loin prices (tenderloin, striploin, ribeye and rump in natural proportions) have gone from $12,000 per mt C+F to $17,000 per mt C+F. Some restaurants will switch to other meat. The large pub chains in Britain, for instance, which are big users of Brazilian striploins, may switch to pork or chicken. Others, such as the many German steakhouse chains, specify the origin of the meat in the dishes on their menus or even in names like “Argentine Steak House,” forcing them to buy Argentinean beef at higher prices.
Processors will have difficulty sourcing topside, silverside and knuckles, but they can rely on inventory for a while since they use frozen product. The Italian bresola business is dependent on Brazilian topsides. It has specific quality criteria, including leanness and PH value, which the Italian processors cannot satisfy in the EU. If production shifts to Brazil, they could import processed products from there.
Importers will have higher margins on December purchases but volumes are not great and chilled meat must be sold within four weeks of arrival, preventing speculation on higher prices in the future.
EU Supply Situation
The EU imports 67 percent of its beef from Brazil (244,186 mt, Jan.-Oct., 2007). The next largest supplier is Argentina (17 percent market share, 60,861 mt), followed by Uruguay (7 percent market share, 25,721 mt). Botswana, Namibia, Australia, New Zealand, Serbia, Chile and the United States supply much smaller volumes.
Brazil’s processed beef imports will not be subject to the EU restrictions. The EU imported 88,266 mt of processed beef from Brazil (Jan.-Oct., 2007), which accounted for 36 percent of total EU beef imports from Brazil. In value terms, however, processed beef imports ($276 million) were only 23 percent of the total. EU imports of frozen Brazilian beef imports totaled $395 million and chilled totaled $522 million in the first ten months of 2007.
The EU’s imports of processed beef imports from Brazil is expected to rise, but the absence of Brazilian fresh and frozen beef cannot be filled by other countries at the same low prices.
European Union/Brazil
Implications Of Interruption In Brazilian Beef Flow To EU
Brazil’s Troubles Could Profoundly Affect the EU Market In 2008
Now that Brazilian beef exports to the European Union (EU) are halted, USMEF is looking at three potential scenarios in the coming months, two of which could present significant opportunities to the U.S. beef industry.
USMEF expects that the EU and Brazil will eventually agree to a compromise list of 300-700 Brazilian farms approved to export to the community. The most optimistic scenario for Brazil would allow EU vets to audit the farms this month and next, with the first shipments leaving Brazil as soon as March -- almost before the last shipment of goods certified under the current system (pre-January 31) has arrived.
If the approved list is initially only 300 farms, Brazilian slaughterhouses that are mandated to slaughter only animals eligible for the EU probably will have difficulty sourcing the roughly 1,000 head per day they need to operate at minimum capacity until the number of farms increases. In this scenario, a significant shortfall in Brazilian shipments to the EU could last for six months until enough farms are approved to supply the slaughterhouses.
It is also possible that EU auditors, who are set to travel to Brazil later this month, could uncover deficiencies that result in an outright ban on Brazilian beef.
In the case of either the initial approval of only 300 Brazilian farms, or an outright ban on Brazilian beef, 2008 should provide an opportunity for increased U.S. beef exports. Due to the uncertainty created by the EU’s new restrictions on imports from Brazil, U.S. beef is now closer in price to South American beef than ever before , although available supply is limited by the EU hormone ban and EU quotas.
Prices for Brazilian and Argentinean beef have surged and EU importers are scrambling to find other sources of supply. EU producers, especially in Ireland and Britain,, are looking forward to higher prices. They have already been holding back cattle in anticipation. While the EU market remains closed or restricted, Brazil is likely to redirect its beef exports to other markets such as Hong Kong, the Middle East, Russia, Venezuela, the Philippines and other South American countries.
USMEF’s office in Brussels reports different parts of the market are affected in different ways:
High quality Brazilian end rump and loin prices (tenderloin, striploin, ribeye and rump in natural proportions) have gone from $12,000 per mt C+F to $17,000 per mt C+F. Some restaurants will switch to other meat. The large pub chains in Britain, for instance, which are big users of Brazilian striploins, may switch to pork or chicken. Others, such as the many German steakhouse chains, specify the origin of the meat in the dishes on their menus or even in names like “Argentine Steak House,” forcing them to buy Argentinean beef at higher prices.
Processors will have difficulty sourcing topside, silverside and knuckles, but they can rely on inventory for a while since they use frozen product. The Italian bresola business is dependent on Brazilian topsides. It has specific quality criteria, including leanness and PH value, which the Italian processors cannot satisfy in the EU. If production shifts to Brazil, they could import processed products from there.
Importers will have higher margins on December purchases but volumes are not great and chilled meat must be sold within four weeks of arrival, preventing speculation on higher prices in the future.
EU Supply Situation
The EU imports 67 percent of its beef from Brazil (244,186 mt, Jan.-Oct., 2007). The next largest supplier is Argentina (17 percent market share, 60,861 mt), followed by Uruguay (7 percent market share, 25,721 mt). Botswana, Namibia, Australia, New Zealand, Serbia, Chile and the United States supply much smaller volumes.
Brazil’s processed beef imports will not be subject to the EU restrictions. The EU imported 88,266 mt of processed beef from Brazil (Jan.-Oct., 2007), which accounted for 36 percent of total EU beef imports from Brazil. In value terms, however, processed beef imports ($276 million) were only 23 percent of the total. EU imports of frozen Brazilian beef imports totaled $395 million and chilled totaled $522 million in the first ten months of 2007.
The EU’s imports of processed beef imports from Brazil is expected to rise, but the absence of Brazilian fresh and frozen beef cannot be filled by other countries at the same low prices.