BRAZIL - The Brazilian beef industry is currently at a peak and about to regress slightly over the coming year, market analysts say.
Currently, cattle output is breaking records. The Ministry of Trade reported a new August export record for Brazilian beef this month with shipments up a fifth on August 2012.
Processors have been the main benefactors, but researchers at Moody’s are forecasting a change in fortunes as margins deteriorate in relation to capacity expansion with no drop in prices forecast.
This summer, strong Russian demand and more buying from Paraguay and Australia have powered the Brazilian market.
Cattle slaughter in the Mato Grosso region boomed in July, recording the highest figures for the first seven months ever – up 10 per cent to 3.47 million head.
High output has coincided with lower cattle values. Figures from the region’s Institute of Agricultural Economics state that average per kilo prices for July averaged $3.04 kg/lwt.
A decline in the price of beef per ton of seven per cent on August 2012 was offset by favourable fiscal conditions, quantified as a 16.6 per cent rise in the dollar to the real.
Moody’s currently see the US picture as gloomier still due to its reliance on corn and soy, two volatile products.
They say Brazil’s pasture-based system offers ranchers more stability going forward through lower production costs. This cannot be said for the US, which is why experts see the 2013/14 year as the ‘worst in a decade’ for US beef processors.
Brian Weddington, Senior Vice Credit Officer at Moody’s says the reluctance of the sector to close plants temporarily means processors are unable to drastically raise the price of beef without affecting demand.
The report ties in with recent animal health reports claiming eight further Brazilian states to be foot and mouth disease (FMD) free. The proportion of the country now free of FMD now stands at 78 per cent.
The Ministry for Agriculture and Supply has spent $34.8 million reals in combating the disease, which now only persists in the less intensive northern regions.
Even in the Amazon region, health ministers are confident that areas will soon have their status changed from high risk to medium.
The outlook for Brazilian beef will seem more certain if the FMD free date of 2015 is achieved.
The World Organisation for Animal Health is expecting another round of requests pertaining to FMD status next month.
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