Sharp decline in Brazilian cattle processing an opportunity for New Zealand

// International Trade

A global shortage of beef, largely due to a sharp decline in Brazilian cattle processing, has the potential to boost prices of New Zealand beef exports.

red meat being served

An analysis by the Beef + Lamb New Zealand Economic Service, funded by farmer levies

Rachel Agnew, Senior Agricultural Analyst for Beef + Lamb New Zealand, said higher prices could provide a buffer for farmers and meat exporters facing the challenges of increased global shipping costs and the high New Zealand dollar.

“Brazil is the world’s biggest beef exporter and China’s demand for beef skyrocketed during 2020.

“China’s beef imports from Brazil increased 112 per cent year on year. Forty percent of total Chinese beef imports in 2020 came from Brazil, and the share of Brazilian beef exports destined for China lifted to 62%, up from 38 per cent in 2017. 

“Industry commentators are reporting that meeting the demand from China, which requires beef to be from animals no older than 30 months, resulted in Brazil digging deeply into its capital stock, including many young heifers. That is also evidenced by surging cattle prices in Brazil, which have doubled in the past 18 months.”

Almost half of all Brazilian beef processing plants are currently temporarily closed – with low domestic demand and recession also a factor.

Australia, which accounted for 12 per cent of China’s beef imports in 2020 – with New Zealand at eight per cent – is also still rebuilding its herd following high drought-induced processing rates in 2019 and 2020.

“Chinese demand for beef remains very high,” says Rachel. “That is partly as a result of the huge stimulus package the Chinese government has put in place because of COVID-19, but also due to the protein shortage caused by the continuing impacts of African Swine Fever (ASF) on Chinese pork production.”

The decline in Brazilian cattle processing was unexpected. US Department of Agriculture (USDA) forecasts for 2021 projected further growth in Brazilian beef production but this is now considered unlikely, as is further export growth.

“There is no risk that New Zealand will overkill its beef herds to meet demand, as we don’t have that kind of model here,” says Rachel.

“New Zealand has responsible and reliable production and processing systems. We recognise sustainable production and returns are important and this will ensure supply will be broadly in line with previous years.

“The real opportunity is that our exports will be going to a global market that is short of beef. China is also likely to be in competition with the US for beef imports, and once you get that competition, you get better prices.

“New Zealand has been impacted by global disruption to shipping, shortage of containers and storage and the high NZ dollar. Shipping costs have almost doubled and the supply chain cannot absorb all the costs so they flow through to exporters while the high NZ dollar also erodes the farm gate price. Higher beef prices would help to balance that out and soften the impact of these obstacles in the market.”

Funded by farmer levies, the Beef + Lamb NZ Economic Service compiles and analyses data at both industry and farm level to support the red meat sector. This helps the industry develop future scenarios at both a systems and farm level.

Along with its regular publications, such as the New Season Outlook and Mid-Season Update, the Economic Service also runs the Sheep and Beef Farm Survey, which provides insights into the state and financial health of New Zealand’s agricultural industry, informs local, regional and central government policy, and underpins forecasts and trends in meat and wool production. It also enables farmers to benchmark their own businesses against others in their cohort.