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Brazil Food and Drink Report Q3 2008
Business Monitor International, July 2008, Pages: 55
This Brazilian Food and Drink Report provides independent forecasts and competitive intelligence on Brazil's food and drink industry.
The Brazilian meat industry is one of the largest and most profitable of all the Brazilian food sectors. However, its market leading position is constantly threatened by health scares and export bans, which have the power to wreak havoc on firms’ revenues. Many of the largest firms have sought to diversify into other countries and other sectors in an effort to shield themselves from this threat. However, a ban on Brazilian beef by the EU in the first quarter of 2008 highlights the precarious position of many food firms operating in this sector.
In February 2008 the EU enacted a complete ban on Brazilian beef imports after concerns were raised about the country’s handling of the latest foot-and-mouth outbreak. An EU Food and Veterinary Office (FVO) report revealed irregularities regarding animal registration, identification, vaccination and certification. Gradually, following stringent inspection procedures, farms are being again given access to the EU market, but as of April 2008, only 95 Brazilian farms have so far received approval. This represents just 1% of the total number permitted to export to the EU before the ban came into place. With the EU the largest export market for Brazilian beef, this action will have a significant effect on the 2008 revenues of Brazilian meat firms. As confirmation of this, the country’s largest beef firm, JBS, has revealed that, in the first quarter of 2008, its beef exports were 20.6% lower than in the same period a year ago.
This action by the EU comes just a year after Russia lifted its own ban on Brazilian meat. Brazil is
Russia’s biggest meat supplier, but in 2005, after a widespread outbreak of foot and mouth disease, Russia prohibited all meat imports from eight Brazilian states. On December 1 2007, this ban was lifted, but it had already forced some Brazilian firms to shift entire production lines to Brazilian states where the ban was not applied.
In a response to the EU ban, Brazilian meat processing firm Marfrig, which derives around 16% of its revenues from exports to the EU, announced it would expand its operations in Argentina and Uruguay. This kind of geographical diversification has been pursued by all of the country’s leading meat firms and is one way to negate the effect of bans on Brazilian meat. JBS now has significant operations in Argentina and has been rapidly expanding in the US. However, despite this diversification all of the leading Brazilian firms, including JBS and Marfrig, rely heavily on meat produced in Brazil and ensuring that these firms do not have to endure an endless cycle of export bans is crucial for safeguarding the long-term health of the Brazilian meat industry.
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