INCREASED volumes of Brazilian beef will soon hit the global export market, the result of three years of herd rebuilding in the South American cattle nation, but the consequences for Australia won't necessarily be negative.
More beef available at a competitive price could well boost consumption, and grow overall demand for beef, in key importing nations like China, benefitting Australia which is targeting the higher end of the market.
However, there will be some markets, such as the United States, where Brazilian exports could create problems for Australian product, analysts say.
Rabobank's animal protein analyst based in Sao Paulo, Wagner Yanaguizawa, says the increased supply, combined with relatively low prices due to a depreciated real and constrained supply in other exporting countries is expected to improve the competitiveness of Brazilian beef in the international market.
In his latest report on the inversion of the cattle cycle in Brazil, Mr Yanaguizawa said China was expected to remain Brazil's largest export destination until at least 2025.
Due to the retention that started in 2019, a significantly increased number of Brazilian calves and steers ready to enter intensive production systems should reach the market in the second half of 2022, the report said.
But consumption in Brazil, one of the world's strongest beef-eating nations, is waning.
Higher prices coincided with lower purchasing power during the pandemic outbreak.
Mr Yanaguizawa said beef was now less affordable to a segment of Brazilian consumers and last year per capita beef consumption reached one of the lowest levels in the last 16 years at 26.2kg.
At the same time export demand is powering, particularly from China since it opened its door to Brazilian beef again in December, having suspended exports for three months due to cases of bovine spongiform encephalopathy,
Demand from other destinations such as the US, Egypt, the United Arab Emirates and Chile has also been red hot. Brazilian shipments in February were up 34 per cent year-to-date in volume and 61pc in value - their best February in history for international sales, Mr Yanaguizawa's report said.
Australian-based animal protein analyst with Rabobank Angus Gidley-Baird said the more attractive pricing on offer in the export market would likely see Brazilian production shift to target exports.
More Brazilian beef in China could be a positive for Australia, driving overall consumption and demand for beef, he said.
"Australia is not directly competing with Brazilian beef in China. We are very different in terms of our positioning," he said.
The US, however, would be a market Australian beef exporters would be watching closely, he said.
Brazil will be competing in the lean trimmings space directly with Australia.
"We have a country-specific quota with the US, where as Brazil falls into the 'other' category - which is a lower quota and is also shared with other suppliers," he said.
Even with tariffs applied, Brazil may be able to supply US importers with product that is not prohibitively expensive, depending on exchange rates and their price.
"Even by late next year, Australia still won't have a lot of surplus cattle, and with processing limitations here as well, our beef supply for export will still be constrained," Mr Gidley-Baird said.
"Combined with the US contraction in their own domestic supply, the pressure might be on for them to open up more access to Brazil which will mean a longer-term bigger competitor for Australia in that market.
"US importers will certainly be looking hard for lean trimmings.
"If Brazil negotiates a country-specific quota, they would have a far more definitive access."
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