28 April 2008

4 minute read

South America

São Paulo – In the face of rising international market food and beef prices, Minerva slaughterhouse, a public company headquartered in the interior of the state of São Paulo (SE Brazil), is betting on the expansion of livestock exports, Lebanon being among the main markets for the sector.

The Investor Relations superintendent at the group, Ronald Aitken, told ANBA that the share of livestock exports in revenues went from 4% in 2006 to 13% in 2007, and 15% in the first quarter this year.

"The main contributing factor to the expansion is the fact that there is a very strong worldwide demand for raw materials," said the executive. "And Brazil is one of few countries capable of expanding herd and production," he claimed. Among the country's competitive advantages, according to him, is the fact that cattle are mostly fed pasture, thus reducing feeding costs, especially at a moment when grain prices are high.

Last year, Brazil exported the equivalent of US$ 260 million in livestock, sales for breeding purposes not included, according to data supplied by the Brazilian Ministry of Development, Industry and Foreign Trade. Venezuela was the leading destination, with US$ 189 million in imports, followed by Lebanon, with US$ 70.8 million

In the first quarter this year, shipments totalled US$ 68.2 million, as against US$ 22.5 million during the same no period in 2007. Venezuela purchased the equivalent of US$ 58.9 million and Lebanon, US$ 9.3 million. The global market, according to Aitken, is worth approximately US$ 2 billion per year, with Australia as the leading supplier.

According to Aitken, there is specific demand for these animals in Lebanon due to religious and cultural issues, because a share of the population prefers to buy the so-called "hot beef", i.e., that which is slaughtered locally and then sold at butcher shops, instead of chilled and frozen beef, which is exported in large amounts by Brazil. The Lebanese importers supply Brazilian livestock to other nearby countries as well.

The case with Venezuela is different. According to the executive, for political reasons, the government of the South American country subsidises import of cattle with the objective of creating jobs at local slaughterhouses.

And what leads Brazilian farmers to become interested in exporting is the fact that, in order to get the animals alive, imports end up offering prices higher than those paid in the domestic market, especially in the northern Brazilian state of Pará, where the highest number of shipments occurs. In such cases, Minerva operates as a trading company, selling the production to third parties.

Although the Brazilian meat industry criticises this practice, claiming that foreign sales reduce domestic livestock supplies and, therefore, drive up the prices of the animals, Minerva, which is one of the leading slaughterhouses in Brazil, has decided to offer its clients a full portfolio, ranging from the raw material to the final product.

Aitken claims, however, that the number of heads of cattle exported is insignificant in the face of the Brazilian herd, therefore the activity has little influence on domestic price formation. "Last year, 432,000 animals were exported, whereas in Brazil approximately 45 million were exported. In other words, exports represent less than 1% of the total," he stated. "Such impact does not exist, what drives prices up is the very cycle of husbandry," he said.

According to the executive, Minerva had a 50% share of livestock exports in 2007, when its foreign sales grew 305%. The company informs that in the first quarter this year the share went up to 67% of total shipments.

And the perspective, according to Aitken, is for sales to continue increasing, as the company expects to do business in other markets, such as Angola, Russia and Italy. In his assessment, Minerva has a competitive advantage: exclusive dealing contracts with European logistics companies that own "corral" ships, specifically designed for this type of transport, which are capable of carrying 17,000 animals, have ventilation for the animals, storage space for feed and capacity for desalinating seawater. "Logistics are the key to this large-scale export business," he asserted.

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