Paris Trade Show Abuzz with Brazilian Depreciation and Confusion in Russia

Paris Trade Show Abuzz with Brazilian Depreciation and Confusion in Russia

By John Brook
USMEF Regional Director for Europe, Russia & Middle East

As the biannual SIAL food fair drew to a close in Paris last week, all eyes were on the Brazilian stands as exhibitors and visitors tried to work out the consequences of the 40 percent devaluation of the Brazilian real against the dollar, and the current confusion surrounding the outcome of Brazil’s large sales of beef, pork and chicken to Russia over the last three months.

By Wednesday afternoon, the stands of the South American companies were already emptying because the exhibitors were only being asked about how many containers might have to be returned to their country of origin or what discounts had to be offered to Russian importers.

U.S. exporters appeared to have largely resolved any difficulties that they faced with their beef and pork sales to Russia. Shipments of beef from the U.S. were lower in August and September than in earlier months, and demand for pork remained fairly steady through the period, or was at least not confronted by the same sudden market downturn. But the situation for South American and Australian suppliers looks dire, with price discounts for beef being rumored to be negotiated at as much as 25-30 percent of the original contract price, a massive readjustment given that the contracts were originally signed at the top of the market.

On the positive side, Brazilian producers say that domestic carcass prices are fairly stable and that any goods returned to Brazil will easily be absorbed into the local market. But this said, with both the Brazilian real and the Australian dollar down 40 percent against the U.S. dollar, the potential for significant increases in their exports after the current confusion in the market clears is evident.

EU importers of U.S. beef remain highly positive and several major EU retailers had the opportunity at SIAL to taste U.S. steaks and were very interested to learn more. While U.S. beef occupies a very high-quality niche in the EU market, and doesn’t necessarily directly compete with grass-fed beef from South America, it is difficult to imagine that the U.S. business can remain totally unaffected by the sudden reversal of the South American situation. Chilled beef cuts imported under the high-quality beef Hilton quota from Argentina, Uruguay and from a slowly reviving Brazil, have tumbled the hardest and fastest. Prices for tenderloins, striploins and rump have dropped from the high of last July of $21,500 per metric ton C+F Europe to somewhere around $11,000 per metric ton or even lower. Some importers report that with a bid at $8,500 per metric ton they can have goods shipped tomorrow. With such a massive price decline, it will be difficult to maintain the record volume of U.S. beef imports recorded over the last four months, or indeed defend the prices.

And around all of this swirl the rumors and uncertainty in the world’s financial markets. The turmoil is of daily or hourly concern and speculation is rife over who might get caught by a sudden lack of bank credit, currency swing or client default. Ironically, the world’s favorite black sheep of the banking business, Argentina, is a haven of financial stability at present, with banks remaining highly liquid and with virtually no exposure to high-risk sectors in the world’s financial markets.

It’s a time to be extremely prudent, but that’s not new.

Hong Kong Authorities Commence Testing of Chinese Meat Products for Melamine

By Joel Haggard
USMEF Senior Vice President, Asia Pacific

Hong Kong's food safety authorities have announced they will accelerate their testing program of Chinese meat and offal products for melamine after finding excessive levels of the industrial chemical in samples of mainland eggs imported from a source in Dalian. The eggs had nearly double the allowable limit of melamine of 2.5 milligrams per 1 kilogram or 2.5 parts per million (ppm) recently set by Hong Kong officials. Foods produced for children and infants under three years of age must contain less than 1 ppm of melamine, according to Hong Kong government guidelines. China's Ministry of Health established similar tolerance levels for melamine in milk and milk products in early October following the sickening of infants from milk laced with melamine.

The U.S. Food and Drug Agency also concluded in its risk assessment issued Oct. 3 that melamine at concentrations below 2.5 ppm in food products other than infant formula was safe. In the worst findings, samples of milk powder from Sanlu Dairy were found to contain as much as 2,563 ppm of melamine. According to recent official Chinese press reports, more than 3,600 mainland children are still suffering various melamine-related ailments, and the total number of children affected has reached 60,000.

Hong Kong's Secretary for Food and Health said this past Saturday that initial experts' opinions assigned blame to poultry feed, although scientists are unsure of the extent to which melamine-laced feed may migrate into muscle and offal tissue. Hong Kong's findings on fresh eggs have not been the first overseas detections of melamine in Chinese meat and poultry products. In early October, Philippine authorities found melamine in two samples of mainland canned meat products — luncheon meat and corned beef. Philippine authorities said last Saturday that additional tests on 18 meat products found no traces of the chemical. Last week, South Korea's Ministry of Agriculture found traces of melamine in Chinese egg powder products, leading to the delisting by Korea of two Dalian-based egg product manufacturers.

China's top lawmakers last week reviewed for a third time a much anticipated food safety law which, among other directives, would require the relevant health departments to conduct risk assessments on food additives. The draft law, which is expected to be adopted late in the year, also gives power to the government to initiate recalls and to scrap exemptions that local food authorities can grant to manufacturers for safety checks. The law also calls upon all related local and national departments to announce food safety problems as soon as they are uncovered. Critics within China have complained vocally that the new food safety law, some parts of which have been added after the latest melamine scandal, will not solve the fundamental problem that China lacks an effective supervisory mechanism for food manufacturers at the local level. It is estimated that three-quarters of China's food manufacturers have less than 10 employees.

Paris Trade Show Abuzz with Brazilian Depreciation and Confusion in Russia

By John Brook
USMEF Regional Director for Europe, Russia & Middle East

As the biannual SIAL food fair drew to a close in Paris last week, all eyes were on the Brazilian stands as exhibitors and visitors tried to work out the consequences of the 40 percent devaluation of the Brazilian real against the dollar, and the current confusion surrounding the outcome of Brazil’s large sales of beef, pork and chicken to Russia over the last three months.

By Wednesday afternoon, the stands of the South American companies were already emptying because the exhibitors were only being asked about how many containers might have to be returned to their country of origin or what discounts had to be offered to Russian importers.

U.S. exporters appeared to have largely resolved any difficulties that they faced with their beef and pork sales to Russia. Shipments of beef from the U.S. were lower in August and September than in earlier months, and demand for pork remained fairly steady through the period, or was at least not confronted by the same sudden market downturn. But the situation for South American and Australian suppliers looks dire, with price discounts for beef being rumored to be negotiated at as much as 25-30 percent of the original contract price, a massive readjustment given that the contracts were originally signed at the top of the market.

On the positive side, Brazilian producers say that domestic carcass prices are fairly stable and that any goods returned to Brazil will easily be absorbed into the local market. But this said, with both the Brazilian real and the Australian dollar down 40 percent against the U.S. dollar, the potential for significant increases in their exports after the current confusion in the market clears is evident.

EU importers of U.S. beef remain highly positive and several major EU retailers had the opportunity at SIAL to taste U.S. steaks and were very interested to learn more. While U.S. beef occupies a very high-quality niche in the EU market, and doesn’t necessarily directly compete with grass-fed beef from South America, it is difficult to imagine that the U.S. business can remain totally unaffected by the sudden reversal of the South American situation. Chilled beef cuts imported under the high-quality beef Hilton quota from Argentina, Uruguay and from a slowly reviving Brazil, have tumbled the hardest and fastest. Prices for tenderloins, striploins and rump have dropped from the high of last July of $21,500 per metric ton C+F Europe to somewhere around $11,000 per metric ton or even lower. Some importers report that with a bid at $8,500 per metric ton they can have goods shipped tomorrow. With such a massive price decline, it will be difficult to maintain the record volume of U.S. beef imports recorded over the last four months, or indeed defend the prices.

And around all of this swirl the rumors and uncertainty in the world’s financial markets. The turmoil is of daily or hourly concern and speculation is rife over who might get caught by a sudden lack of bank credit, currency swing or client default. Ironically, the world’s favorite black sheep of the banking business, Argentina, is a haven of financial stability at present, with banks remaining highly liquid and with virtually no exposure to high-risk sectors in the world’s financial markets.

It’s a time to be extremely prudent, but that’s not new.

Hong Kong Authorities Commence Testing of Chinese Meat Products for Melamine

By Joel Haggard
USMEF Senior Vice President, Asia Pacific

Hong Kong's food safety authorities have announced they will accelerate their testing program of Chinese meat and offal products for melamine after finding excessive levels of the industrial chemical in samples of mainland eggs imported from a source in Dalian. The eggs had nearly double the allowable limit of melamine of 2.5 milligrams per 1 kilogram or 2.5 parts per million (ppm) recently set by Hong Kong officials. Foods produced for children and infants under three years of age must contain less than 1 ppm of melamine, according to Hong Kong government guidelines. China's Ministry of Health established similar tolerance levels for melamine in milk and milk products in early October following the sickening of infants from milk laced with melamine.

The U.S. Food and Drug Agency also concluded in its risk assessment issued Oct. 3 that melamine at concentrations below 2.5 ppm in food products other than infant formula was safe. In the worst findings, samples of milk powder from Sanlu Dairy were found to contain as much as 2,563 ppm of melamine. According to recent official Chinese press reports, more than 3,600 mainland children are still suffering various melamine-related ailments, and the total number of children affected has reached 60,000.

Hong Kong's Secretary for Food and Health said this past Saturday that initial experts' opinions assigned blame to poultry feed, although scientists are unsure of the extent to which melamine-laced feed may migrate into muscle and offal tissue. Hong Kong's findings on fresh eggs have not been the first overseas detections of melamine in Chinese meat and poultry products. In early October, Philippine authorities found melamine in two samples of mainland canned meat products — luncheon meat and corned beef. Philippine authorities said last Saturday that additional tests on 18 meat products found no traces of the chemical. Last week, South Korea's Ministry of Agriculture found traces of melamine in Chinese egg powder products, leading to the delisting by Korea of two Dalian-based egg product manufacturers.

China's top lawmakers last week reviewed for a third time a much anticipated food safety law which, among other directives, would require the relevant health departments to conduct risk assessments on food additives. The draft law, which is expected to be adopted late in the year, also gives power to the government to initiate recalls and to scrap exemptions that local food authorities can grant to manufacturers for safety checks. The law also calls upon all related local and national departments to announce food safety problems as soon as they are uncovered. Critics within China have complained vocally that the new food safety law, some parts of which have been added after the latest melamine scandal, will not solve the fundamental problem that China lacks an effective supervisory mechanism for food manufacturers at the local level. It is estimated that three-quarters of China's food manufacturers have less than 10 employees.