Brazil Livestock and Products Semi-Annual - February 2007

US - By USDA, Foreign Agricultural Service - This article provides the cattle industry data from the USDA FAS Livestock and Products Annual 2007 report for Brazil. A link to the full report is also provided. The full report includes all the tabular data which we have omitted from this article.
calendar icon 4 March 2007
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USDA Foreign Agricultural Service

Report Highlights:

Post projects beef and pork production to increase in 2007 due to continued expansion in exports and a firm domestic market. Post also revised data for 2006 to include final export data and new production data obtained from the trade.

Executive Summary

Brazilian cattle and beef production is forecast to expand in 2007 despite the continuing impact of Foot-and-Mouth Disease (FMD) since October 2005. The increase in beef production is mostly driven by firm export and domestic demand. Trade analysts expect that projected higher economic growth combined with higher consumer purchasing power will likely maintain domestic demand firm for beef. Post also projects beef exports to expand in 2007 because most countries have reduced their trade restrictions for Brazilian product, and because Brazilian exporters have increased their exports to new and diversified markets overseas. However, nearly 60 percent of beef exports remain concentrated to Russia, the European Union, and Egypt. Post also projects pork production to increase in 2007 because traders expect a rebound in pork exports and continued firm domestic demand.

Note: Post forecasts for beef and pork production and trade in 2007 reflect current trade restrictions and bans. As of February 26, 2007 there are partial restrictions on Brazilian beef and pork from over 40 countries, but the most important are those from the European Union and Russia.

Commodity Outlook, Cattle and Beef

Production

The calf crop is estimated to grow at five percent in 2007 reflecting higher yields obtained by Brazilian cattle producers. Although cattle producers in general complain about their loss of profitability in the past three years, trade sources have confirmed higher investments in animal genetics and pasture. In addition, the use of partnership between packers and cattle producers has increased significantly in the past three years. Under this partnership, cattle producers supply high standard animals, and quality beef cuts are normally supplied to upscale restaurants and barbecue places in Brazil and for select export markets. There is also a trend to move cattle raising north, towards the pre-Amazon region (Mato Grosso, Para) where production costs are lower and land is still not in competition with soybeans and sugar cane.

Post estimates beef production in 2007 at 9.3 million metric tons, up 3.4 percent from last year. The following factors support our revised estimate: a) firm domestic demand for beef is likely to continue strong due to higher consumer purchasing power; b) increase in exports by six percent, boosted mostly by expansion into non-traditional markets supported by strong market promotion; c) improved pasture conditions due to higher rainfall and higher funding for the National Pasture Improvement Program; and, d) likely small improvement in profit margins to cattle breeders.

Post also revised production and trade data for 2005-06 to include final export-import data. Beef production increased by nearly five percent last year, slightly higher than our initial forecast. The major force driving an increase in beef production in 2006 was a surprising increase in export markets.

Trade

Post projects beef exports to expand by six percent in 2007, a lower rate than the expansion in 2006 due to possible restrictions by the European Union, mostly related to market access by the new members of the EU, Romania and Bulgaria. Russia remains also a major concern to Brazilian exporters due to the FMD outbreak in Mato Grosso do Sul in 2005. These two important markets still maintain partial restrictions on Brazilian beef exports. Official inspection teams from the European Union, Russia, and Chile are expected during the first semester of 2007 to assess Brazilian control over the outbreak, including laboratory support.

Review of 2006. Brazilian beef exports reached another record in 2006 despite some partial import restrictions from some countries due the outbreak of FMD in October 2005. The total volume exported, including variety meats, increased by 12 percent in volume (1.597 million metric tons versus 1.433 million metric tons in 2004 – PWE equivalent). The total value exported increased significantly by nearly 29 percent (US$ 3.994 million, versus US$ 3.103 million in 2005 because of the increase in the average export price of 15 percent.

Brazilian exporters also increased the number of markets for their products to over 150 countries in 2006, mostly to non-traditional markets, such as the European Union, Russia and Egypt. They also diversified their product mix, although frozen boneless beef still holds the largest share of exports – about 65 percent. Other cuts such as forequarters also increased, mostly to the Middle East and Eastern Europe. In 2006, although total exports of processed beef declined slightly in volume by 1.4 percent, beef exporters increased exports of variety meats by more than 55 percent. Exports of processed beef to the United States, mostly corned beef, increased by 22 percent, partially offsetting a slight decrease in exports of processed beef to the Great Britain.

Despite some animal health restrictions, Russia increased by 8 percent beef imports from Brazil in 2006 and reached an-all time record of nearly 320 million metric tons. Russia is now the largest single individual importer of Brazilian beef, followed closely by the European Union and Egypt. These three markets combined accounted for 58 percent of Brazil’s beef exports in 2006. The United States increased from 29 to 31 percent its market share of Brazil’s processed beef exports (mostly corned beef), followed closely by Great Britain with 25 percent.

Note: Differences between export data reported by Brazilian trade sources and those used by Post are due to the use of different conversion factors. Brazilian sources use a 2.5 percent factor for conversion of processed beef into Carcass Weight Equivalent (CWE), while post uses 1.79. The same applies for boneless beef, as Post uses 1.42 as the conversion factor, while Brazilian trade sources use 1.36. As per FAS reporting instructions, HTS 0206, 0504, and 1601 are not included for reporting purposes.

Further Information

To read the full report please click here (PDF format)

List of Articles in this series

To view our complete list of 2007 Livestock and Products Semi Annual reports, please click here


February 2007

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