Bring up the subject of global beef trade, and inevitably the talk turns to Brazil. It seems everyone wants to know about Brazil. Is the country really the threat to U.S. cattle producers that many believe?
After several trips south, it appears U.S. cattlemen have less to fear from Brazil today than most think. The reason boils down to quantity vs. quality.
Brazil's advantage is its ability to produce beef at a low cost. On a pound-for-pound basis Brazil can produce beef for 30-50% less cost than U.S. producers — and 85-90% less than Australian producers.
Yes, Brazil supports the world's largest commercial cattle herd — almost 190 million head. The U.S. boasts about 97 million head.
But, quite simply, Brazilian beef isn't what's going to be for dinner in the U.S. for quite some time. Brazilian beef is grass-fed, chronologically older, less tender and has a stronger taste than most American beef consumers will tolerate. This isn't a knock on what Brazilians believe is the best beef in the world — it's just a difference in tastes and eating habits.
The “Nelore” factor
Why is Brazilian beef the way it is? It's because Brazilian producers are for the most part stuck with the Nelore cattle breed. In fact, more than 85% of Brazil's cattle are based on Nelore genetics.
Granted, Nelore cattle as a breed, are hardy, thrifty, able and can withstand the abuse a tropical environment can dish out. For what's asked of them, Nelore cows are as good as any in the world.
But, in that harsh environment, numbers are one thing, productivity is another. Dressing percent at slaughter averages 50-53% in Brazil. Female age at conception is 24-30 months. And, average slaughter age is 36 months at about 1,100 lbs.
Start shaving those productivity factors off 190 million head and beef production/animal/year shrinks considerably. Combine the lower productivity with the “quality” factors Americans prefer in our beef, and you can begin to see why Brazil won't put you out of business anytime soon.
Of course, the first question is likely: “Why don't they crossbreed?” The next question is: “Why don't they just feed their cattle like we do?”
Answer: Brazil is crossbreeding, and with success, especially in the more moderate southern climates. Most breeds familiar to Americans are available to increase the productivity of the Nelore cow.
Brazil is also feeding some cattle, mostly aimed at mixing annual forage silage with soybean meal to rough cows and heifers through the dry season to boost reproductive efficiency. Some producers are trying to mimic U.S.-style “fattening” systems and getting by. Still, less than 2% of Brazilian slaughter falls into the “fed” category.
Brazilians are finding, though, that once they start crossbreeding and feeding concentrated rations, their costs begin to increase, which erodes their comparative advantage. Brazil's inroads into American-style beef production are just a bit more than niches being propagated on various scales. Of course, 1-2% of 190 million cattle represents a significant amount by any standard.
The Brazilian beef industry is finding itself in a Catch-22. As its commercial/export agricultural systems mature, especially in the south, cow pasture must compete for acreage with crops like soybeans, sugar cane (for ethanol), cotton, coffee, citrus and tobacco. Like Argentina's Pampas and the U.S. Great Plains, increased crop production raises land values, which pushes out livestock.
By the way, no matter how you look at it, corn is an ugly sister to many other crops in Brazil. Only in the far south can corn yields and quality worthy of notice be produced. And there, corn will always be fed first to the better “converters” — people, poultry and pigs.
So, as time goes by, Brazil's cattle-raising epicenter is moving north to the tropical frontiers — and away from the south where Brazilians have the best chance of producing “quality” beef through better feeding and breeding. In moving north, Brazilian cattlemen are also moving into a twilight zone of inadequate infrastructure, property rights puzzles and pervasive corruption.
Will Brazil be the competitive beef giant many believe? Yes, it certainly will be — in time, in places and in some forms. If I were an Australian cattleman, I'd be shaking in my boots.
Should you as a U.S. cattleman be losing sleep over Brazil? Not tonight. But, don't doze so soundly that you oversleep.