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Brazil eyeing the leadership position in beef export

Beef accounts for 25% of the total meat consumption globally and hence, it is the third most widely consumed meat in the world. The beef production varies with season, domestic and international demand. The world beef production increased by a CAGR of 0.46% from 57.78 (million MT in 2006) to 60.48 (million MT in 2016), whereas world beef consumption increased by a CAGR of 0.3% from 56.99 (million MT in 2006) to 58.73 (million MT in 2016). The United States is the world largest beef producer as well as consumer, accounting for 19% of the world’s total production and 20% of world total consumption. It is followed by Brazil and the European Union accounting for 15% and 13% respectively. 

     

Additionally, since 2006 beef consumption in developed nations has slightly declined, except the US (19.31 kg per capita consumption in 2006 to 18.21 kg per capita consumption in 2016), the main reason for this decline was health concerns. It is believed that the consumption of red meat has a negative effect on health and is a source for several diseases. Therefore, people in developed countries switched to leaner meat and thus, their poultry meat consumption increased. Meanwhile, in developing countries, the beef consumption witnessed a rising trend since 2006 (7.59 kg per capita consumption in 2006 to 8.22 kg per capita consumption in 2016). The main reason for this increase is attributable to the rising purchasing power of the middle class. An increase in beef consumption in developing nations raised the global beef demand and opened new markets for various beef exporting nations.

In the developed economies, the United States and the European Union were the largest producers and consumers of beef in 2016. The US produced and consumed 18.8% (11.81 million MT) and 19.9% (11.85 million MT) of global beef respectively, while EU produced 13.0% (7.85 million MT) and consumed 13.4% (7.87 million MT) of global beef.

However, in developing economies, China and Brazil were the largest consumer and producer of beef in 2016. China produced 11.4% (6.9 million MT) and consumed 13.1% (7.8 million MT) of global beef respectively, while Brazil produced 15.3% (9.3 million MT) and consumed 12.8% (7.5 million MT) of beef globally.

India, Brazil, Australia and the US are the largest exporters of beef at international level, these export ~65% beef globally. Independently, India, Brazil, Australia and the US export 19.6 % (1.85 million MT), 19.6 % (1.85 million MT), 14.7% (1.39 million MT), 11.9% (1.12 million MT) beef internationally.

The Indian beef industry is mainly characterised as buffalo meat producer and it experienced significant growth in 2013, 2014 and 2015. Therefore, in order to profit from the increasing demand in international market, India’s beef production was ramped and production increased by a CAGR of 5.1% from 3.31 (million MT in 2011) to 4.25 (million MT in 2016), whereas the beef export increased by a CAGR of 7.8% from 1.27 (million MT in 2011) to 1.85 (million MT in 2016). Moreover, India has the largest existing cattle inventory in the world (30%) followed by Brazil (22.6%) and China (10%). It is due to the large cattle inventory, which is mainly on account of a strong dairy demand clubbed with currency devaluation (w.r.t the USD) that the Indian beef is the cheapest in the world. 

Furthermore, several markets prefer Indian beef because of the production as per halal standards and this meat has positive blending characteristics and is regarded as lean meat. Indian buffalo meat is mainly exported to developing nations in South East Asia, the Middle East and Africa, in these, Vietnam, Egypt and Malaysia are its main export markets. In addition, from 2011 to 2014 beef demand in Vietnam escalated and India mostly catered to this demand. This increase was on account of rising GDP per capita from 1.33 million (USD in 2010) to 2.05 million (USD in 2014). This, in turn, increased the purchasing capacity of the middle class and beef consumption per capita rose from 4.64 kg per capita (2010) to 9.94 kg per capita (2014). Indian beef exports slowed down during 2015 on account of beef ban due to which production remained stagnant on a YOY basis. But increase in local demand by 13.7% on a YOY basis led to a decrease in beef for exports. Indian beef export market is only limited to the countries mentioned above, it does not have a market share in developed countries such as the US, Japan, EU, etc. This is mainly because of hygiene issues and lack of FMD (Foot and Mouth Disease) status classification by OIE (World Organisation for Animal health).

Brazil is the second largest exporter of beef in the world. The country’s major export destinations are China, Russia, the US and Asian nations. Brazil’s beef exports increased by 8.5% to 1.85 (million MT) on a YOY basis in 2016. This was mainly due to rise in demand from Asian markets and besides, there was also a decline in beef prices in Brazil. The beef prices declined by 8.5% (2015) and 4.6% (2016) on a YOY basis, which made Brazilian beef more competitive in the global market. The decrease in prices was mainly on account of devaluation (~5%) of the Brazilian currency. This led to low purchasing power in the hands of Brazilians, which, resulted in, the decline in consumption and thus, beef was available for exports.

Australia is the 3rd largest exporter of beef. The nation’s beef exports increased at a CAGR of 2.9% from 1.43 (million MT in 2006) to 1.85 (million MT in 2015) but declined significantly by 25.3% on a YOY basis to 1.39 (million MT in 2016). This decrease was on account of the low cattle inventory due to high beef slaughter rate in previous years on the back of high global demand. Subsequently, a severe drought in 2016 affected several regions in Australia, this further led to a decrease in cattle inventory and caused livestock rears to rebuild their herd population. Consequently, all the above factors led to a decline in beef production, this, further resulted in a drastic decrease (25.3 % on a YOY basis) of beef exports in 2016. The Australian beef price inflated by 23.7% in 2014 on a YOY basis because of increase in demand. Moreover, in 2015 the prices increased in local currency by 11.9% on a YOY basis, but due to currency depreciation (20.3%), the price hike in local currency translated in a decline of 7% in the USD terms.

Australian and Indian beef price were approximately similar in 2011, both catered to different export markets. India exported to developing economies such as Vietnam, Egypt, Malaysia, etc. Although Australia, on the other hand, exported to developed and developing nations such as the US, Japan, China, South Korea and Indonesia.

The United States is the 4th largest exporter of beef and the country mainly exports beef to Mexico and Japan. The US experienced drought in certain regions during 2013-15 and a significant decline in cattle inventory was witnessed, which led to decrease in beef production by 8.9% from 11.75 (million MT in 2013) to 10.82 (million MT in 2015). This also resulted in an increase in beef imports and beef prices. The nation’s imports increased by 31.1% (2014) and 14.4% (2015) on a YOY basis and the prices increased by 20.7% in 2014 on a YOY basis. Australia catered to this increased demand in the US. Secondly, 2016 saw favourable weather conditions, this increased beef production by 5.3% to 11.39 (million MT) and a corresponding decrease in beef import by 10.4% to 1.37 (million MT) on a YOY basis.

According to the USDA, it is estimated that global beef production, consumption and exports are projected to increase in the future. In 2016, the US per capita beef consumption increased by 1.1% to 25.02 kg per capita due to which its total beef consumption has increased by 3.4% on a YOY basis to ~12 Million MT. Hence, US beef consumption is likely to increase. The European Union’s beef consumption is projected to decline and beef production will nearly remain stagnant. Australia will continue to rebuild its cattle herd population, hence, its beef production, as well as beef exports, will decrease. China’s beef production is estimated to remain stagnant while its consumption may increase. Thus, providing an opportunity for beef imports. Brazil’s beef production is anticipated to increase, while its consumption is projected to remain almost stagnant. Brazil’s beef export share may exceed than that of India. The reopening of Brazilian beef exports to the US will also help it to become the top beef exporter. India’s beef consumption is anticipated to increase slightly more than its estimated production, therefore, regional beef prices might rise. Indian beef industry may face competition from Brazilian beef industry since Brazil caters to import from developed and developing economies, while India only supplies to developing markets. Although, Indian beef is the cheapest, but the price gap between Brazilian and Indian beef is negligible since 2011. Overall, the beef industry is expected to grow along with beef production and consumption. 

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