Decision on Brazilian beef by US puts pressure on EU

This began in the middle of March with operation Weak Flesh, when Brazilian investigators revealed that unfit meat was getting approval by officials who were considered compromised.

This was added to by the controversial relationship between JBS, the world’s biggest meat processor, and the Brazilian government, where the meat processor was built using finance provided by the Brazilian government bank at favourable rates, much better than the open finance market.

This has culminated in crippling fines for JBS, which has in turn led to a fire sale of assets, including the Northern Ireland-based poultry processor Moy Park.

Block supplies

Now the US has decided to block further Brazilian supplies, less than a year after they were reinstated following a previous suspension.

In the eight months since they resumed shipping beef to the US, 6,380t had been delivered to 10 June, according to USDA import figures. Actually, the expectation in Brazil on relaunch had been that this figure would have been closer to 100,000t for the entire year, going well beyond the tariff-free quota of 64,000t that they have access to, the same quota that Ireland uses.

It has been a period of volatility in beef supplies around the world so far this year.

Australia is currently on target to supply just half the beef to the USA that they did in 2015, and demand continues to grow in China, where Brazil has become the number one supplier. This is a market that Brazil will now be concerned about, and the uncertainty has been reflected in Brazilian cattle prices which have fallen from the equivalent of almost €2.60/kg to the equivalent of €2.10/kg last week.

Now that the US has taken this decision, the focus turns to what the EU will do. After the March incident, the EU Commission went on an inspection tour and reports are that there were plenty of reasons for concern, even though the full report is still not published.

Speaking to the Irish Farmers Journal in Brussels earlier this week, Agriculture Commissioner Phil Hogan said that the 100% level of inspections was sufficient assurance for EU consumers. The USDA has an equally rigorous inspection process, yet it does not have confidence to allow it in under any circumstances. The pressure will now increase on the EU to do likewise.

Opportunities for Ireland

This ban will further damage Brazil’s reputation internationally for beef, which in theory creates further opportunity for other exporters like Ireland. However, the other side of the debate is that as Brazil’s reputation is reduced, so also is the value of their beef. This is reflected in falling farmgate price and an abundance in supply of cheaper beef on the open world market.

The final possible impact on Ireland comes from the pursuit of Chinese approval. Now that there is at least a question mark over one of their main suppliers, surely Ireland will be a more interesting prospect to them as a supplier of quality beef. Which the inspection process to approve factories due to begin in the near future, this could finally be an opportunity for Ireland to open this lucrative market.

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Brazilian meat scandal