Brazil floods China with beef
An economic cooldown has impacted the overall consumption of beef in China, but demand from a burgeoning middle class has ensured imports continued to rise. Official beef imports from China increased by a staggering 74% year-on-year, according to Rabobank’s Beef Quarterly report.
The global beef reports paints a picture of unmistakable volatility, with cattle supplies tight in Australia, deflation in Brazil, a cooling Chinese economy and instability in the US.
Three of these factors have played a part in making Brazil the largest supplier of beef to China in the first three months of 2016. The nation is now responsible for 31% of Chinese imported beef. Australia has dropped to third position with a 21% share, while Uruguay remains the second-largest supplier of beef.
Loss of confidence
There are three factors that have each contributed to the dramatic changes in the origin of Chinese beef imports. “The first is that the Chinese government has wanted to improve its sourcing options across food and agriculture,” said Justin Sherrard, global strategist of animal protein at Rabobank.
“The second part of the story is that you have reduced beef supply out of Australia – you have the hangover of lots of production from a few years ago and that has now caught up with production, which is down. Right now, we see quite some uncertainty about the future direction of Australian [beef] exports, because supply has tightened right up and cattle prices are back up to record levels.”
Sherrard explained that the third factor was the rise of beef availability in Brazil – a process that started 12 months ago when a number of beef plants gained permits to supply meat to China. Reduced domestic consumption is making Brazil export its beef.
“The combination of the political situation, the economic slowdown and the loss of consumer confidence mean that domestic consumption is down in Brazil and exports are up,” said Sherrard. “This is across all of the proteins in Brazil.”
Chinese imports of Brazilian beef are expected to remain strong throughout the year, given the depreciation of the Brazilian real, stable supply and competitive prices in comparison to Australian beef.
