In November 2019, the Irish Farmers Journal led with the headline that the price of beef in Brazil was on par with Ireland, with their average steer price at an equivalent of €3.29/kg.
This was a time when the Irish R3 steer price was particularly weak at €3.44/kg (ex-VAT) and has since risen to €3.73/kg (ex-VAT), while the euro equivalent price in Brazil has collapsed to €2.35/kg.
However, this doesn’t reflect the collapse in the value of Brazilian beef but a collapse in the value of the Brazilian currency compared with the euro.
The price being paid for beef in Brazil at present is similar to what it was last November in their currency, the Brazilian real (BRL).
At that time, it required BRL4.65 to equal €1, but, since then, a sustained weakening in the value of the Brazilian currency means it now requires BRL6.25 to equal €1.
It has also fallen in value by a similar amount when compared with the US dollar, the currency that is most used in international trade.
Argentina
While the Brazilian currency has weakened in the past year, the value of the Argentinian peso (ARS) appears to be in freefall.
A decade ago, it required ARS5 to buy €1. By the start of 2016, when Argentina resumed beef exports following a change in government, the value of the peso had halved compared with the euro, with ARS10 required to purchase €1.
The value had halved again by this time three years ago, when it required ARS20 to purchase €1 and, since then, the decline in value of the Argentinian currency has accelerated further.
The value halved again to ARS40 = €1 in August 2018 and now, in August 2020, is worth just half that value again, at ARS85 = €1.
This makes Argentinian beef exceptional value to customers paying with euro in the EU or US dollars in the Chinese market.
Exports
The competitiveness of South American beef is reflected in the growth of their exports.
Last month, Brazil exported 169,000t of beef, their second-highest on record, and they expect to set new monthly records in the later months of this year, the peak Chinese buying season.
They are also expected to grow their annual beef exports over the coming years as they have the production capacity and an ever-increasing global demand, particularly from China.
It has been a similar picture with the growth of Argentinian beef exports. Between 2006 and 2015, beef exports were falling because of an export tax imposed by the then-socialist government to control the cost of beef to Argentinian consumers, the biggest beef eaters in the world.
In 2015, export volumes had fallen to under 200,000t but had grown to 750,000t in 2019 and are expected to increase further this year, with China buying just under 80% of this.
Impact on Irish exports
It is impossible for Irish beef exports to compete in global markets where the euro has retained all of its value against the US dollar, the currency in which business is conducted.
What’s more, through the Mercosur-EU trade agreement, it has been agreed to give access for a further 99,000t of beef at a low tariff rate (7.5%).
As the currency falls in value in Brazil and even more so in Argentina, it means that their exports to the EU in euro will continue to become cheaper, reducing the value of the market to Irish beef.
Access to the UK market in a future Mercosur-UK trade deal would add to this problem. The weakening value of currency in major global beef exporting countries is a huge threat to Irish farmers.
Read more
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Mercosur report confirms beef fears
Argentina’s economy in serious trouble
In November 2019, the Irish Farmers Journal led with the headline that the price of beef in Brazil was on par with Ireland, with their average steer price at an equivalent of €3.29/kg.
This was a time when the Irish R3 steer price was particularly weak at €3.44/kg (ex-VAT) and has since risen to €3.73/kg (ex-VAT), while the euro equivalent price in Brazil has collapsed to €2.35/kg.
However, this doesn’t reflect the collapse in the value of Brazilian beef but a collapse in the value of the Brazilian currency compared with the euro.
The price being paid for beef in Brazil at present is similar to what it was last November in their currency, the Brazilian real (BRL).
At that time, it required BRL4.65 to equal €1, but, since then, a sustained weakening in the value of the Brazilian currency means it now requires BRL6.25 to equal €1.
It has also fallen in value by a similar amount when compared with the US dollar, the currency that is most used in international trade.
Argentina
While the Brazilian currency has weakened in the past year, the value of the Argentinian peso (ARS) appears to be in freefall.
A decade ago, it required ARS5 to buy €1. By the start of 2016, when Argentina resumed beef exports following a change in government, the value of the peso had halved compared with the euro, with ARS10 required to purchase €1.
The value had halved again by this time three years ago, when it required ARS20 to purchase €1 and, since then, the decline in value of the Argentinian currency has accelerated further.
The value halved again to ARS40 = €1 in August 2018 and now, in August 2020, is worth just half that value again, at ARS85 = €1.
This makes Argentinian beef exceptional value to customers paying with euro in the EU or US dollars in the Chinese market.
Exports
The competitiveness of South American beef is reflected in the growth of their exports.
Last month, Brazil exported 169,000t of beef, their second-highest on record, and they expect to set new monthly records in the later months of this year, the peak Chinese buying season.
They are also expected to grow their annual beef exports over the coming years as they have the production capacity and an ever-increasing global demand, particularly from China.
It has been a similar picture with the growth of Argentinian beef exports. Between 2006 and 2015, beef exports were falling because of an export tax imposed by the then-socialist government to control the cost of beef to Argentinian consumers, the biggest beef eaters in the world.
In 2015, export volumes had fallen to under 200,000t but had grown to 750,000t in 2019 and are expected to increase further this year, with China buying just under 80% of this.
Impact on Irish exports
It is impossible for Irish beef exports to compete in global markets where the euro has retained all of its value against the US dollar, the currency in which business is conducted.
What’s more, through the Mercosur-EU trade agreement, it has been agreed to give access for a further 99,000t of beef at a low tariff rate (7.5%).
As the currency falls in value in Brazil and even more so in Argentina, it means that their exports to the EU in euro will continue to become cheaper, reducing the value of the market to Irish beef.
Access to the UK market in a future Mercosur-UK trade deal would add to this problem. The weakening value of currency in major global beef exporting countries is a huge threat to Irish farmers.
Read more
Over 17% of some Brazilian beef exports related to deforestation – study
Mercosur report confirms beef fears
Argentina’s economy in serious trouble
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