Brazil, home to the world’s largest beef cattle herd, is intent on lifting productivity to increase competitiveness in global beef markets. However, this isn’t expected to erode Australia’s trade position – at least in the medium term – according to a visiting expert on the South American beef sector.
Rabobank Brazil-based senior analyst Adolfo Fontes, who is in Australia as a keynote speaker at the World Braham Conference in Rockhampton, said the “potential to increase beef production in Brazil is huge” through improved genetics and grain-fed systems to boost carcase weights.
“We are starting to see a shift towards more intensive production systems in Brazil,” he said, “with expectations that by 2025, 20 per cent of beef will be produced through a feedlot system – up from 10 per cent currently. We are also seeing Brazilian farmers increasingly adopt integrated crop-livestock systems to utilise their maize or soybean crops, and it is estimated that five million hectares are farmed this way.”
Mr Fontes said while intensive production systems would increase the quantity, and also quality, of Brazil’s beef, it was still lagging behind the sophisticated production systems of the US and Australia – where feedlots account for around 90 and 30 per cent of beef production, respectively.
Mr Fontes said Brazilian farmers were also focused on improving genetics, with European breeds such as Angus and Hereford increasingly incorporated into the national herd through crossbreeding.
“If we can lift the productivity of our Brazilian cattle herd – which stands at 220 million head – we could emerge as the world’s largest beef producer,” he said. “Currently the US are the largest producer, yet they have around 90 million head of cattle.”
As the world’s second largest beef producer, Brazil also holds second-place in global beef trade, with key markets including China, Egypt, Russia and the EU.
“Brazil is set to become the biggest supplier of beef into China, with around 200,000 tonnes expected to be exported this year,” Mr Fontes said, “however, most of this growth represents a transition from the Hong Kong market to official Chinese channels.”
Mr Fontes said Brazil was also on track to secure access to the US fresh beef market, with the first shipment anticipated by the middle of the year.
“While exports to the US will be limited by quota agreements, access to the US market will improve Brazil’s position in international markets and could be the catalyst for other markets to open their trade barriers – with sights set on Japan, South Korea, Mexico and Canada – although this could be a long way off,” he said.
Reassuring Australian beef producers, Mr Fontes said Brazil’s improved trade position wasn’t expected to erode Australia’s market share, with global beef consumption forecast to continue to outstrip Brazil’s rising production.
“Australia is renowned for its high quality product, traceability and food safety and we expect Australia to continue to be the key, high-quality supplier into markets such as the US,” he said.
“That said, once Brazil improves the quality of its product, which is achievable in the next 10 to 20 years, we could see competition increase.”
Mr Fontes said there were “challenges to the outlook” however, with Brazil facing infrastructure bottlenecks as well as political and economic uncertainty.
“Currently 96 per cent of Brazil’s exports go through ports in the south, however it would be faster and cheaper to ship product from the north,” he said. “While Brazil is working to address these challenges through road upgrades, progress is being hindered by the complex political and economic situation.”
With Brazil facing high inflation and rising unemployment, Mr Fontes said some commentators are describing the current economic crisis as the most serious the country has ever seen. “GDP is expected to fall by more than three per cent this year, and this has seen domestic beef consumption decline in favour of cheaper proteins such as poultry.”
This has seen a greater proportion of product directed into exports, Mr Fontes said, with export competitiveness aided by the devaluation of the Brazilian real.
“Even with the weak Brazilian exchange rate, Australian beef remains competitive into China from a price perspective,” he said, “and we would expect the per unit price of Brazilian beef to stabilise with the currency not likely to fall further.”
Responsible for analysing the beef sector for Rabobank in Brazil, Mr Fontes previously spent five years as the market intelligence coordinator for a leading international company in the animal nutrition business.
Rabobank Australia & New Zealand Group is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 115 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of approximately 8.6 million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand Group is one of Australasia’s leading rural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 94 branches throughout Australia and New Zealand.
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