Brazilian beef back in China

When Brazil’s minister for agriculture, Carlos Fávaro, led a 100-strong industry delegation to China last week, the hope was that they would prepare the way for Brazilian beef to get back into the market.

As well as the commercial need, there was also the matter of a visit by President Lula, his third overseas visit since his return to office late last year.

As it turned out, illness prevented him travelling and the visit has to be rescheduled. However, the agriculture minister and his industry delegation received the news they were waiting for on Friday, that Brazilian beef exports to China could resume with immediate effect.

Mutual dependence

This was great news for Brazil’s beef processors and their suppliers as they exported over 1.2m tonnes (shipped weight) out of their 2.3m tonnes total beef exports, to China in 2022. To put this in context, Brazil’s second largest market for beef last year was the US, which took 134,000t, just over 10% of what was exported to China. If China was out of the market for any length of time, this amount of beef chasing an alternative home would cause serious disruption to the global beef trade.

It would also cause a major problem for China. As the demand for beef imports surged in China over the past decade, the main source of supply was Brazil. In the first 11 months of 2022, over 40% of all China’s beef imports came from Brazil, with Argentina a distant second supplying 18% followed by Uruguay on 13%.

While Brazilian processors with factories in Argentina and Uruguay switched to product from these countries for their customers in China during the suspension, they would never be able to replace the volumes coming from Brazil.

Brazil had been able to ramp up imports of pigmeat when domestic production was decimated during the African swine fever outbreak 2019-2021, but pig production can be increased much faster than cattle production.

Irish angle

It was a coincidence that Ireland got the go-ahead from China to resume beef exports just a few weeks before Brazil had to introduce its suspension. Ireland had been out of the market for the same reason as Brazil, the discovery of a single case of BSE in May 2020.

Unfortunately, Ireland didn’t get the same priority as Brazil. The reality is that China isn’t as dependent on Ireland for volumes nor indeed is Ireland as dependent on China as an export market. In fact, the Chinese market is to Brazil what the British market is to Irish beef exports.

The other reality is that Brazil being out of the market for just over a month will have had negligible impact on Chinese demand for Irish beef. Irish approval for export to China is relatively restricted as bone in cuts of beef which are popular in China are excluded. Also, all Irish beef exports to China must come from cattle under 30 months old, which restricts the supply base further.

That said there is an expectation that if we can avoid any further disruptions, Irish exports to China by the end of 2023 will be significant and be one of our main export markets after the UK and probably the largest outside of Europe.

The big concern for Irish exporters and indeed their Brazilian counterparts is the discovery of another BSE case. Atypical BSE is completely random and not classified as a concern by OIE, the World Animal Health organisation.

In fact, the Irish case in May 2020 didn’t mean Ireland losing its BSE negligible risk status, the highest level achievable when it comes to BSE risk.

However, those are the terms and conditions Ireland had to accept to secure approval by China to supply beef. It was the same for Brazil when it agreed a similar protocol in 2015. It would be very much in the interest of a global beef trade that China would revisit this condition in relation to BSE, but ultimately it is they who will make that call.

While Ireland will never be as exposed to the Chinese market as Brazil, it nevertheless has potential to be a top-five export market and at that point any disruption would have a negative though not a catastrophic effect on Irish beef prices.