Trade

China re-opens for business in beef trade out of Brazil, but with qualifications

Jon Condon, 17/12/2021

After being frozen out of the China export market for more than three months following a BSE scare, Brazil has been re-admitted this week, but with qualifications.

China on Wednesday announced the recommencement of beef trade with Brazil, under a new set of conditions including a requirement for slaughter animals to be less than 30 months of age, and all products to be boneless.

Both are designed to diminish risk associated with BSE, which was identified in two Brazilian animals back in late August.

China says it will accept Brazilian beef under the new terms with a production date from 15 December. Product produced between 4 September and 15 December that meets China’s new requirements will also be accepted, however that quantity is extremely small and will have little to no market impact, analysts say.

Brazil originally applied a voluntary suspension on its beef trade to China on 4 September after tests on two suspect animals confirmed cases of atypical BSE.

Based on the outcome of a previous BSE episode in Brazil in 2019, many anticipated trade with China would re-open within a couple of weeks, creating relatively little disruption to supply.

“The last instance of atypical BSE in Brazil was resolved within 10 days, and given China’s reliance on Brazil to fulfil beef volumes and China taking 60pc of Brazil’s beef exports, both countries are incentivised to amend this as quickly as possible,” MLA said at the time.

Instead, the market remained closed for more than 100 days, having profound impacts on cattle and meat prices in both Brazil and China.

Indications that Brazil may have been getting close to a resumption of trade came back on 2 December, when Chinese authorities agreed to allow Brazilian beef held in storage, packed prior to the September 4 closure, to be released for sale in China. Some onlookers saw this concession as the first step in a restoration of trade.

Brazil’s three-month absence from the China market has created the biggest void in global beef trade seen this year. It’s contribution to overall Chinese protein supply was made all the more significant by China’s ongoing battle with African Swine Fever in its pork industry.

Brazil accounted for almost 40pc of China’s January-October beef imports, of 1.97 million tonnes, with Brazil share accounting for 758,700t. Conversely, from Brazil’s perspective, China accounted for 58pc of all its exports up to September this year, amounting to 1.6 million tonnes.

To put this into some context, Australia’s entire beef exports to all markets this year will struggle to exceed 900,000t.

Brazil’s overall beef exports plummeted during October as a consequence of the China suspension. October export sales plummeted to 8200t, down from 112,000t the month before.

The recommencement of trade between Brazil and China was being welcomed across Brazil by farmers, processors and exporters yesterday. Brazils cattle market responded with an immediate four percent rise, as processors looked to restart the China business.

China’s new conditions on Brazil are similar to steps taken by other importing countries in the past after similar BSE bans, and if history is a guide, could see these requirements in place for several years, as what can be best described as an interim step before regular shipments are allowed, Australian analyst Simon Quilty said.

“The news, as stated, is bittersweet for Brazil exporters given the losses incurred over three months in demurrage, lower beef prices and lower prices into alternate markets, with many asking the question – Could this have been avoided?” Mr Quilty said.

“I believe the answer could have been yes if more transparency had been provided at the time of each BSE detection and finding. It was the lack of transparency and pre-meditated decision to build large beef export inventories and ship record volumes that I am sure led to the extended ban,” he said.

China’s beef market responded yesterday, with wholesale beef prices falling $3000 RMB/tonne on the news, which equates to US$480/t.

Interestingly, cattle slaughter in Brazil suffered initially falling close to 30pc in September on the closure, but since then has increased to much higher levels in November, surpassing last year’s November kills, with solid domestic pricing playing an important role.

Part of the rise in November was due to lower marketings in the previous month which saw a lift in cattle pricing, with cattle producers in November being happy to sell into this rising market. In December, cattle prices have eased slightly in the last week.

 

 

 

 

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