Prices hang on Brazil's import ban duration

MLA and Commonwealth Bank experts weigh in on China's suspension of imports of Brazilian beef

Beef
File photo.

File photo.

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The suspension of beef imports was implemented after two separate cases of bovine spongiform encephalopathy.

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CATTLE producers are anxiously waiting to see what impact China's suspension of beef imports from Brazil will have on both demand and prices in Australia's domestic and international markets.

The suspension was due to two separate cases of bovine spongiform encephalopathy (BSE) in the southern Brazilian states of Minas Gerais and Mato Grosso and market experts believe the full impact of the pause on imports won't be known until a timeline for their resumption is announced.

Brazilian agriculture department officials described the two BSE cases as 'atypical', meaning they were regarded as lower risk than typical presentations of the damaging disease.

Meat and Livestock Australia international markets general manager Andrew Cox said the amount of beef trade between the two countries would encourage a quicker resolution to the issue.

"I think the big impact will be on the Brazil and China side of things obviously because at least 35 per cent of China's beef imports are coming from Brazil, so it will have immediate and pretty significant impact on beef wholesale prices in China and the availability of beef stocks," Mr Cox said.

"However, I think that obviously provides an incentive to resolve the issue quickly.

"Last time Brazil had an atypical case of BSE it was only a 10-day suspension, so there is a bit of time for the supply chain to get around that 10-day suspension, but given the high-demand I suggest there will be an imperative to get this resolved quickly."

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The two cases of BSE come after Argentina's government implemented a 30-day total ban on beef exports in May this year to keep a lid on domestic meat prices, which was then eased to 50pc of the average monthly volume exported in the second half of the previous year.

Mr Cox said while those factors would play a part, the length of the suspension would shape what impacts it would have on the Australian beef sector.

"In terms of the implications for Australia, I think it is difficult to tell because I don't think there's a whole lot of reasons to get excited here because the opportunities for Australia are probably limited given the likelihood of a short resolution, our supply situation at the minute and, more importantly, Australia's ongoing market excess issues with China," he said.

"I haven't heard anything about the timeframe of the suspension at all, but based on past resolution in 2019 it was only 10 days.

"The only difference this time is that there is two cases and two simultaneous cases may trigger a wider review, but as I said, the commercial imperatives to keep that trade going will be very strong.

"That would be the single biggest shipping channel for beef globally so it is hard to say what kind of impact it would have in saleyards given it's at the other end of the supply chain so I don't really want to speculate too much on that front."

Commonwealth Bank director of agri-commodities, economics Tobin Gorey described the suspension as a "big deal" and if it were to last for an extended period, Australia's prices could also be impacted.

"Most of the very high prices we are currently seeing in Australia is due to the ongoing herd rebuild," Mr Gorey said.

"However, there is another layer coming through now that has been created by Argentina's export moves and now Brazil, which means the global price of beef is going to be higher."

Mr Gorey said the impacts were largely dependent on the duration of the suspension.

"There is a whole spectrum of turns it could take, it could take a couple of weeks, a couple of months, but if I was forced to guess, I would say it would be measured in months rather than weeks," he said.

"They will have to go through the process of convincing China's regulators and customs officials that the beef is free of the disease.

"It's going to be felt across the board because Brazil is too big. If it was a smaller producer it probably wouldn't be a big deal, but it is a major broad-spectrum beef exporter."

US-based RaboAg senior analyst Don Close echoed Mr Cox's sentiments saying he didn't think "this issue will last long enough to have any meaningful impact on any market" and that "a short breather wouldn't hurt a thing".

"Most of the comments I have heard is talking days, not weeks. Keep in mind, there is a global shortage of protein, especially beef. China's imports of protein were down nine pc in August largely due to a reduction of pork imports," Mr Close said.

"The US is certainly watching to see what develops with the Brazilian BSE cases but, we are not expecting any measurable disruption of trade."

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The story Prices hang on Brazil's import ban duration first appeared on The Land.

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