At a Brazilian “churrasqueira” restaurant, waiters will pile grilled beef on to your plate until you expire, or say stop, whichever comes first. Brazilieros are not alone in enjoying their meat. Brazilian beef ends up in American hamburgers and British Sunday lunches. China and Hong Kong takes the biggest portion, a third. That is under threat. A Brazilian bribery scandal involving meat inspectors has caused them to call a halt. Bad news for implicated Brazilian producers such as JBS. Good news for cattle traders in the US.
Prices for live US cattle (and beef) have jumped by a quarter this year on hopes of a supply squeeze. Although the US cannot sell its beef to China, it can do so to Hong Kong where it has about a third of the market.
For all the gnashing of teeth over this latest Brazilian scandal, prices have so far only performed a dead cow bounce. Live cattle futures have had a poor run over the past two calendar years, during which they nearly halved. That was partly because of Brazil’s weak currency which helped a surge in exports. In the four years to 2014, average beef exports in tonnes rose 35 per cent.
But a rising real and the block on Brazilian exports has capped global volume growth. Some big importers, such as the EU, are considering stopping purchases too. Cattle prices look to be in a long-term uptrend. Surging Chinese demand outweighs the weakening appetite of health-conscious westerners. Importers’ bad-tempered beef with Brazil will help ensure a better return on the steak money of rival producers.
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