If nothing else, Brazil has an advantage in numbers. Today, with “all beef cattle” totaling 165-170 million head (compared to 97 million head in the U.S.), Brazil has the world's largest commercial cattle herd. That translates into domestic beef production expected to reach a national record 7.7 million metric tons (mt) in 2004 — a 4% increase over 2003.
The following factors compiled by Joao Silva, agricultural specialist with the U.S. Embassy in Brazil, support this projection:
a 2% rebound in domestic beef demand due to an estimated economic growth of 3-4% and improving employment rates and consumer purchasing power,
additional funds in the federal budget for social programs to fight hunger and improve nutrition for the poor,
booming export markets in view of the impacts of the avian influenza crisis in Asia and the bovine spongiform encephalopathy (BSE) cases in North America, and
improved pasture conditions due to higher rainfall, mostly in Brazil's Central West region, in the first quarter of 2004.
Brazilian beef exporters are expected to ride this wave of increasing beef production by boosting output 15% this year — taking the lead in global beef exports at nearly 1.4 million mt. Only five years ago, Brazil had half the number of its current export customers and exported only 464,000 mt of beef. Acceptance of its regional foot-and-mouth disease (FMD) status in 2002 is key to Brazil's expanded presence in global beef markets.
Current optimism among Brazilian beef exporters includes filling the gap left by the U.S. and Canada in certain world markets. However, that export optimism is tempered by increased domestic beef consumption, competition from Argentina and Uruguay, and competition within the European Union from beef suppliers in their own market.
The Ghost Of FMD
Today though, Brazil still has regions that aren't free of FMD. Thus, the U.S. and a few other countries continue to ban fresh, chilled or frozen Brazilian beef. In those cases, imports are limited to thermally treated, processed and canned products like corned beef and beef extract.
Brazil has made considerable progress in eradicating FMD, and has had no official cases since August 2001. Today, 85% of Brazil's cattle herd is officially free of FMD with vaccination. In 2004, 92% of the cattle herd is predicted to be free with vaccination. By 2005, the Office of International Epizootics (OIE) expects to certify all Brazil as FMD free.
The Brazilian government recognizes FMD as a “South American” problem. Earlier this year, Silva says, the Brazilian Ministry of Agriculture donated 1 million doses of FMD vaccine to Bolivia and 500,000 doses of vaccines to Paraguay in an integrated program to eradicate FMD from the Southern Cone.
Brazilian trade officials have chosen Japan, Korea and Taiwan as priorities in animal health negotiations. The U.S is another priority and Brazil is pressuring the U.S. government to complete the risk assessments necessary to export fresh beef to the U.S.
Currently, only animals from FMD-free or FMD-free-with-vaccination regions are allowed into plants certified for export. With a national cattle ID system in place targeting FMD-free regions, there's little chance the disease will show up in international markets.
Eradicating FMD in South America has the potential to alter the structure of the world beef trade, says Janet Perry, chief of the Animal Products Branch of USDA's Economic Research Service (ERS) Market and Trade Economics Division.
“It would alter the market for lean grass-fed processing beef that has typically been dominated by Australia and New Zealand,” she says.
The U.S. Meat Export Federation warns Brazil could begin shipping fresh/frozen beef to the U.S. later this year. These imports would likely fall under the 64,800 mt/year “other” tariff rate quota (TRQ) system the U.S. allows for beef imports.
“It's unclear whether this would be a net positive or negative for U.S. beef producers,” Perry says. “It depends on what markets the imported beef would fill.”
Today, Uruguay is allowed to export fresh beef to the U.S. under a 20,000 mt/year TRQ. If and when Argentina can prove it has FMD under control, it could resume its 20,000 mt/year TRQ.
“But, the ghost of FMD may haunt South America long after it's officially eradicated,” Perry says. “Will markets that depend on a stable supply trust that FMD really is gone?”
Not Your Typical Table Beef
Brazil's beef production systems and the type of beef it produces are worlds apart from that in the U.S. Nearly all beef in Brazil is grass-finished, and there's virtually no use of growth hormones or ionophores.
About 65% of Brazil's beef cattle genetics are Nelore-based, and 85% are Nelore-influenced. Nelore is a Bos indicus species closely linked to India's ancient breed of Ongole cattle, says Sandra Carreiro, Campo Grange, Mato Grosso, Brazil. She's a genetics veterinarian with Sete Estrelas Embriões, one of Brazil's leading Nelore genetics producers.
“Nelore is the ideal breed in the harsh climatic, nutritional and sanitary conditions we see in the tropics because of their hardiness and rustling ability,” she says.
There's little disagreement, too, that Nelore matches the recent shift toward a low-calorie, leaner-meat diet, without compromising taste. This was demonstrated at the 1991 Houston Livestock Show when a purebred Nelore steer won the “Best Overall in Taste” contest while competing against dozens of hybrid and European steers.
But, what Nelore beef gains in performance under tropical conditions, and taste and leanness, it sorely lacks in consistency and tenderness.
Pound for pound, Brazil's beef production costs are a third to a half those of American ranchers, and 15% lower than in Australia, according to USDA's ERS. Brazil's second-world, beef productivity surfaces, though, in factors like average age at slaughter, which is 30-36 months, and carcass yields of only about 50-55%.
One must be careful in making too many comparisons between beef production systems, however, says Russell Hackly, Clarkston, KY. He's a cattle producer who participated in BEEF magazine's two-week tour to Brazil in January.
“We shouldn't underestimate the power of crossbreeding and the technology that exists in Brazil to catch up with the world,” he says.
While traveling in Brazil, it's common to hear that the “big five” Brazilian packing companies control the beef export business. Friboi, Minerva, Frigotel, Independencia and Bertin are highly integrated firms.
Family-owned Bertin, for example, kills 500,000 head/year — owning many of them from conception to consumption. Meanwhile, the larger Independencia has tanneries, rendering systems and fertilizer plants to utilize its by-products.
These companies buy feeder cattle to finish on their own pastures, and slaughter-ready animals from smaller farmers.
Farmers are wary of the fact that packers are allowed 30 days to pay for cattle purchases from farmers. There are scores of smaller packers killing 800 or fewer head/day scattered across the cattle-producing regions of Brazil, but few are “certified” for sale into the export markets.
While multinational food companies like Cargill, ADM and Bunge have a huge presence in Brazil, they aren't feeding or packing cattle.
The Bottom Line Today?
Undoubtedly, Brazil is one of the most competitive countries worldwide in animal protein production.
And, with the absence of U.S. and Canadian beef in South Asian markets for what could be all of 2004, those markets could open further to Brazil at the expense of Australia and New Zealand.
“I just don't see the Brazilians being a threat to the American desire for high-quality table beef, though” Hackley says. “To compete in anything but the low-quality beef markets, they're going to have to change a lot of ways they produce beef, including a dramatic change in their genetic base. I don't see how that can happen anytime soon.”
The Brazilian potential though, shouldn't be overlooked, he warns.