US import ban the latest setback for Brazil’s beleaguered beef industry

On Thursday night last week, the US Department of Agriculture (USDA) announced the immediate suspension of fresh beef imports from Brazil amid “recurring concerns” about the food safety of the product.

The USDA said it has been inspecting 100% of all imports of Brazilian beef since March, when a meat scandal erupted in Brazil after a number of meat processors were found to be selling rotten or tainted meat after bribing customs officials.

In that period, the USDA said it has rejected 106 lots of Brazilian beef, which came to a combined 862t, on public health concerns, sanitary conditions and animal health issues.

The 106 lots rejected by US authorities equates to an 11% refusal rate on Brazilian beef imports since March, which the USDA says is substantially higher than the rejection rate of 1% of shipments from the rest of the world.

For European beef farmers, the USDA ban on Brazilian beef is further verification that the country’s beef is not produced to high enough standards to enter the EU market and the European Commission will now be under pressure to follow the US lead.

The US ban has prompted fresh calls from European farmer organisations that beef be removed from any potential trade deal between the EU and the Mercosur trade bloc, of which Brazil is a member.

The IFA has said that the Mercosur countries had consistently failed to meet EU standards on the key issues of traceability, animal health and welfare controls, as well as the ban on hormone-growth promoters and environmental controls.

The European Commission is being called on to publish its full report on Brazil’s meat industry, after food safety officials went on an inspection tour of processing facilities in the wake of the meat scandal in March. While the report is yet to be published by the European Commission, early indications are that there were plenty of reasons for concern during the inspection tour.

Corruption

For Brazil, the events of the last four months have been a disaster for the country’s reputation, both in political terms and as a food exporter. The meat scandal that first erupted in March following the revelations of Operation Weak Flesh has only been the tip of the iceberg.

The country’s largest meat processor, JBS, has been at the very centre of a corruption scandal that now looks like it will lead to the impeachment of President Michel Temer. Less than a year in office,

Temer is now being charged with corruption amid allegations he took millions of dollars in bribes from JBS.

Seven senior executives at JBS have already signed a plea agreement with Brazilian prosecutors after admitting to charges of paying €165m in bribes to public officials and politicians in Brazil since 2010.

JBS was handed a €3bn fine as a result of the bribery charges but executives escaped prison time for their co-operation with the wider investigation, known as Operation Carwash. President Temer became entangled in the corruption scandal after it emerged Joesley Batista, chair of JBS and member of the Batista family, which controls the meat processing giant, had secretly recorded on tape a conversation between himself and Temer discussing bribes made by JBS to politicians.

Just 11 months in office after he took over from the previous leader Dilma Rousseff, who herself was impeached for breaking fiscal laws, Temer now finds himself as the first Brazilian president to ever be formally charged with a crime.

Appointed on a reform agenda, Temer is deeply unpopular with ordinary Brazilian’s and his position as president is becoming weaker by the day.

Export declines

For Brazil’s meat industry, the combination of the meat scandal in March and the corruption charges levelled at JBS over recent months has been especially damaging. Agriculture accounts for 20% of Brazil’s economy and almost half (43%) of total exports. Annual beef exports are close to $6bn with 1.4m t shipped in 2016.

In March, when the meat scandal first came to light, Brazilian beef exports declined by 11% year-on-year to less than 100,000t. This decline intensified in April as exports deteriorated by 19% year-on-year to just over 70,000t, which was the lowest volume of beef exported from Brazil in a single month since April 2012.

In May, Brazil shipped just over 90,000t of beef to export markets, which represents a 10% decline compared to the same month last year. Major buyers of Brazilian beef including China, Russia and Hong Kong have all reduced orders in recent months from the South American country.