AGRICULTURE-BRAZIL: Foot-and-Mouth Shakes Up Global Beef Market

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Oct 14 2005 (IPS) - The outbreak of foot-and-mouth disease (FMD) in western Brazil could drive up international beef prices, which is why experts believe the ban on Brazilian beef imports will be short-lived.

For the moment there are no substitutes that could supply the global market if a large part of Brazil’s exports are blocked, José Vicente Ferraz, the technical director of FNP Consultoría, a private consulting firm that collects and disseminates agricultural data, told IPS.

Brazil is the world’s biggest exporter of beef, exporting 2.243 billion tons from September 2004 to August 2005, nearly as much as all of its competitors combined.

The largest rivals are facing difficulties in increasing their offer. Australia suffered a 10-year drought that led to a sharp reduction in its herd, and recovery requires cutting the number of animals slaughtered, which will limit beef production for several years, Ferraz pointed out.

Argentina is still recovering from a severe economic crisis, and the country’s exports are at their upper limit. The European Union, meanwhile, went from exporter to net importer, and the United States is suffering the repercussions of two cases of mad cow disease.

FNP experts thus predict that the ban on Brazilian beef will not last long, perhaps only a few weeks, if the Brazilian government takes the necessary measures to curb the outbreak of FMD and carefully explains to importing countries the steps it has taken..

FMD is caused by a virus that does not affect the meat or human health but is highly contagious among the animals themselves and costly for stockbreeders. Cases of the disease were confirmed Monday by the Agriculture Ministry on the Vezozzo ranch in the west-central state of Mato Grosso do Sul, near the Paraguayan border.

All of the animals on the farm were slaughtered – 582 head of cattle and seven pigs – an extensive area was cordoned off, and the transport of livestock was suspended in the area, while more than 30 countries cancelled part of their imports of Brazilian beef.

The EU, the country’s biggest market, banned purchases from Mato Grosso do Sul, Paraná and Sao Paulo, the leading beef-exporting states.

Israel, South Africa, Argentina and Uruguay took the most radical measures, canceling all beef imports from Brazil, while Chile and Russia, the single biggest importer of Brazilian beef, only banned imports from the state of Mato Grosso do Sul.

Brazil complied with international regulations, immediately reporting the problem with transparency and taking steps to prevent the spread of the disease, Antenor Nogueira, the head of the Confederation of Agriculture and Stockbreeding (CAN) livestock forum, told IPS.

That bolsters the country’s credibility and favours the prompt return to a normal volume of exports, said Nogueira. In second place, Brazil “is fortunate” that its competitors cannot fill the vacuum left by a prolonged reduction in its exports, during a year when demand is set to grow six percent, he added.

Nevertheless, there will be serious effects, especially for the country’s international image, after years of efforts to make headway in markets around the world. Brazil was on the verge of getting the United States to import its natural beef, but now “we’ll have to start from scratch again,” Ferraz lamented.

According to the projections, Brazil will lose several hundreds of millions of dollars in exports this year and even more next year, if the ban is not lifted soon.

>From January to August, the country exported 2.164 billion dollars in beef, 32.7 percent more than in the same period in 2004. Nearly 30 percent of the sales involved processed products that are not affected by the ban.

Ferraz argued that the government is mainly to blame for this setback, due to an economic policy that has dedicated most of the budget to servicing the public debt, while reducing funds for agricultural sanitary measures.

This year, financial officials only disbursed 0.24 percent of the funds earmarked for animal health, and none of that money went to Mato Grosso do Sul, which has the largest herd of any of Brazil’s states: 25 million head of cattle. Many stockbreeders have directly blamed Finance Minister Antonio Palocci for the current disaster.

In addition, the agricultural census scheduled for this year, which is carried out every 10 years, was also postponed for two years due to a lack of public funds. Without up-to-date statistics, agricultural policy is inevitably precarious, complained Ferraz.

He predicted a worsening of the crisis plaguing Brazil’s livestock industry and thus a lengthy period of pressures that will drive up international beef prices.

The FNP estimates that due to the low prices on the domestic market, Brazil’s herd shrank from 176 million animals in 2003 to the current 164 million. Financial troubles forced many ranchers to slaughter their breeding stock, which will hinder recovery in the future.

The overvaluation of the real, the local currency, resulting from the government’s monetary policy has also affected profit margins in the industry.

For all of these reasons, Ferraz also predicts a strong rise in prices of beef on the domestic market, contradicting the projections of the state of Sao Paulo Agriculture Secretary Antonio Nogueira Junior, who said prices would drop 32 percent, because the fall in imports would lead to an expansion of supplies within the country.

But Ferraz said that was misinformation that could cause a sales race and aggravate the crisis in the livestock industry, causing a greater rise in prices in the future due to scarcity of production that will also drive down the country’s exports.

10141443 ORP005 NNNN