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Brazil Beef Exports Moving Up Again

Brazilian beef exports will increase steadily throughout 2009, despite the closure of dozens of Brazilian meatpackers and the global credit crunch, according to industry specialists.

Brazilian beef exports will increase steadily throughout 2009, despite the closure of dozens of Brazilian meatpackers and the global credit crunch, according to industry specialists. The industry shakeout means capacity has readjusted and meatpackers have adequate beef to ship to hungry international markets, according to industry executives and analysts. According to analysts, the global demand for beef remains robust and markets will steadily buy more beef throughout the year.

"Brazilian beef shipments should be only 5% to 8% lower than last year, and
then start to grow in 2010," said Otavio Hermont Cancado, executive director of the Brazilian Beef Exporters Association.

This would be an improvement from the first two months of 2009, when beef
exports plummeted 49% in January and 14% in February compared to a year ago due to the credit crunch. For instance, cash-strapped Russian importers often failed to pay for imports or renegotiated lower prices. With unclaimed beef waiting at Russian ports, Brazil ’s beef exporters faced tough decisions about whether to send shipments back to Brazil or sell at cheaper rates.

Since then, industry specialists said a recovery has occurred. They point to
a narrower decline in exports in March versus 12 months ago. Brazil exported 82,100 metric tons of beef in March compared to 66,000 tons in February, although this fell from 84,400 tons in March 2008, the Foreign Trade Ministry said Wednesday. The beef trade also brought in $233.6 million to Brazil in March compared to $185 million in February and $272.5 million a year ago. Cancado said imports from Russia and markets in the Middle East and North Africa helped to boost exports in March.

An executive of a leading Brazilian meat company said Brazilian beef exports
should strengthen throughout the year. He estimates exports will rise around
25% in April compared to March and should continue to grow during the year.

"I’m bullish," he said. “This is because of the favorable foreign exchange rates and, in particular, the strong global demand for proteins.”

He said demand from Russia should remain steady. Russia gets around 50% of its beef from local sources and needs to import the rest, the executive said. Moreover, Russian beef imports also seem to be thawing after the credit crunch.

"There were companies that didn’t have sufficient credit, and they have now disappeared. Other stronger companies have taken their place and are doing business," he said.

Other industry sources also remain confident Brazilian meatpackers and exporters can supply both domestic and international demand. The shake out of meatpackers resulted from an overcapacity, they said. Dozens of smaller meatpackers have closed their plants and have laid off workers. Meatpacker Independencia, the largest casualty to date, has fired 6,200 workers, racked up at least $1.4 billion in debt and closed its 23 plants.

Cancado said even with recent bankruptcies and closures, Brazil has around 45% spare capacity and can easily supply consumers. Fabiano Tito Rosa, a livestock analyst at Scot Consultancia, said Russia is likely to remain Brazil ’s number one customer, but some shipments may switch to new markets such as Chile or the European Union. Chile should start receiving Brazilian fresh beef by May. The market probably will account for around 100,000 tons of beef per year.

Beef exports to the E.U. should also expand in 2009 as more ranchers are
certified to export fresh beef from Brazil. The E.U., traditionally one of the highest-paying markets for Brazilian beef, restricted most beef from Brazil at the start of 2008. The E.U. claimed the meat didn’t meet health requirements, or traceability rules. The number of ranchers should double to around 2,000 by the end of 2009 from about 1,000 currently, Rosa said.

"With solid demand and easier access to credit at better rates, we expect
Brazilian beef exports to be strong this year," he said.

Brazil, the world’s number one beef exporter, shipped around 2.1 million metric tons of carcass-equivalent-weight beef in 2008.