Rising living standards in Brazil will cut beef exports

DESPITE the prospect of a small increase in beef production in the current year to around ten million tonnes

Brazil is likely to export less beef in 2008, according to Robert Metcalfe of the Brazilian Beef Information Service in London. Brazil currently exports 27 per cent of its production, with the remainder destined for the domestic market. Demand on the home front is growing rapidly as living standards rise and it is reckoned that consumption in Brazil increased by at least 180,000 tonnes during 2007.

Metcalfe said: "Coupled with the strengthening of the Brazilian currency by 40 per cent over the last two years, this means that domestic prices for some cuts of beef are now higher than those in the international market. A reduction in the supply of beef for export became evident in the second half of 2007 and is likely to continue throughout the current year."

Exports to the EU in the first eight months of last year totalled 126,500 tonnes while the UK imported just over 21,000 tonnes over the same period. There have been concerns over the probity of Brazilian beef for some time following a major outbreak of foot-and-mouth disease in October 2005 in three of the major producing regions.

In theory no beef should be exported to the EU from these areas, but in May last year a delegation from Ireland claimed that they witnessed widespread breaches of the relevant protocols. The Irish also claimed that the FMD vaccination programme was haphazard at best while traceability was extremely doubtful.

The Irish findings were reported to Brussels but were largely dismissed as scaremongering. However, following a visit late last year by officials from Brussels, Markos Kyprianou, the EU health commissioner, decreed that a range of restrictions should be imposed on Brazil from the end of this month. Only farms and plants that comply with EU standards will be permitted to export beef.

According to Brazilian government figures, the average income has risen by over 5 per cent during 2007 and it is also suggested that there will be a further increase during 2008. Metcalfe claims that the increase in domestic demand will have a far greater impact than any sanctions. The Irish Farmers' Association claims that these suppositions are a less than discreet massaging of the realities.

Metcalfe said: "The EU rules will have little effect on export supplies. Farms are currently being audited to see whether they meet the EU import standards. Those farms which reach the approved list will comply fully with European and Brazilian traceability regulations. EU inspections will follow. Despite domestic demand, Brazil remains the world's biggest beef exporter and is determined to be fully compliant with EU requirements."

That claim remains to be tested, but in any event the US absolutely refuses to accept any imports from Brazil. In recent years Russia has emerged as the largest customer for Brazilian beef. In the first nine months of last year Russia imported 319,000 tonnes, which is over 100,000 tonnes more than in the same period of 2005. Egypt is also another major importer, taking in 152,000 tonnes in the January to end of September period last year.

Meanwhile, world production of beef in the current year is forecast to grow by just 1 per cent, but demand is likely to be as much as 3 per cent higher. This should lead to higher returns for farmers and there are already indications of that both in the UK and Ireland. The final figures for 2007 have yet to be published, but it is anticipated that the UK will have imported around 235,000 tonnes of beef, the vast majority of which will have been sourced in Ireland. Beef from Ireland has traditionally been cheaper than the UK product, but the recent depreciation of sterling against the euro will inevitably push up import prices and this has the potential to result in more expensive beef in the supermarkets.