In 2005 and 2006, imports of Brazilian beef flooded into the EU. With Brazilian prices more than 50% lower than those in the EU, the result was a crash in our domestic market. The question is: are we likely to see a repeat?
The answer will largely depend on the extent to which the EU enforces equivalence of standards. As is the case with US beef, Brazilian beef still does not meet EU standards. Tagging and traceability measures are accepted to be prevalent on less than 10% of farms and, where implemented, only apply to the last 70 days of an animal’s life. Meanwhile, regulatory measures pertaining to food safety and animal health measures enforced on EU farmers are not adhered to in Brazil.
But perhaps longer term, one of the biggest barriers preventing Brazil targeting Europe with cheap beef will be the shift taking place in their production model.
In a report from the country, we look at how the Brazilian beef industry is moving towards higher input systems. The two farms profiled are operating at the very top end of the scale, both in terms of technology adoption and management practices. This is reflected in the level of output being achieved relative to national averages. While not representative, the farms give an insight into the direction of travel of the country’s beef industry in the years ahead.
Similar to what we have seen across much of the world, the surge in crop production has seen the beef cow base in Brazil forced on to more marginal land.
On integrated farms, beef cows are now confined to sandy soils with low clay content that are not suitable for cropping. It is simply a case of economics – even on the top-performing beef units, the return from the sector relative to cropping is between 20-30%.
This economic reality, coupled with new environmental restrictions that have significantly reduced the availability of new land for a beef herd that was once migrating north ahead of cropping, is starting to force radical change in the beef sector.
Assuming Brazil remains committed to developing and enforcing what appear tougher environmental controls, the beef sector is simply not going to have access to the land area required to sustain such a land-hungry production system – a system where average slaughter age is three to four years. The response will either be to dramatically reduce the national beef herd or intensify the system.
Interestingly, in the state of Mato Grosso, where land pressures are intense, farmers are incentivised to slaughter animals younger with an 80% reduction in slaughter tax being offered for animals slaughtered under 18 months.
Given Brazil’s logistical challenges, it is likely that the trend towards more intensive feedlot-type systems will be the preferred route rather than a dramatic reduction in cow numbers. This would be strategically aligned to the policy of trying to trade up the protein ladder before incurring the inflated costs of transportation to the ports. Such a move would see the production systems evident on pages 22-23 becoming much more commonplace. This would be significant from an Irish and global beef perspective in that it would totally change the cost base for one of the world’s largest exporters.
Even with access to top-quality feed ingredients at highly competitive prices, the cost per kilo of production on these US feedlot-styled units will be typically four to five times higher than the traditional grass-based system that once had unrestricted access to land.
Back to the present, the concern for Ireland remains that post-Brexit Britain, in any bilateral trade agreement, could relax standards on Brazilian beef imports. Ultimately, the biggest threat for the Irish beef sector is being forced to compete with non-EU beef imports from countries that do not have the costs of complying with EU standards.
Ireland’s efficient grass-based beef model – coupled with a sound premiumisation strategy – can compete, but only if there is a level playing field.