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Foreign Investors Romancing Brazil’s Cattle Breeding Business

Foreigners wish to participate in the growth of Brazil’s beef exports. Last week, a North American group called Global Protein Group (GPG) announced the formation of a joint venture with the cooperative Corol Agroindustrial, from the southern Brazilian state of Paraná, to build a slaughterhouse for beef exports.

The operation is one of the few announced officially, but, according to specialists in the sector, companies from outside the country have shown interest in investing in national cattle breeding.


“There have been data consultations, searches for information on the sector,” says the executive-director at the Brazilian Beef Industry and Exporters Association (Abiec), Antonio Jorge Camardelli.


They have their eye on the segment’s exports good performance, result of opening new markets and the low cost of national cattle breeding. The GPG should start building the exporting meat packing plant next year already.


The North American company will invest US$ 20 million and the cooperative from Paraná, which is based in the city of Rolante, another US$ 20 million. Initially 500 steers per day will be slaughtered. In three years it will be 2,000 animals.


The production will be exported to the United States, Canada, Europe and Asia. The GPG was created by groups of North American cattle breeders just to do this kind of operation in South America.


The United States is one of the Brazilian competitors losing space in the international beef market. The North Americans fell from second place in the product’s ranking of world exporters, in 2002, to the ninth position last year.


In 2002, the United States exported 1.1 million tons of beef, but the appearance of the mad cow disease in the herd, discovered at the end of 2003, made sales drop to 209,000 tons last year.


The European Union (EU) is another region that lost external market space in the last few years, due to diseases in the herd. The EU is today in the eighth position as world exporter, with sales of 350,000 tons. In 2003 and 2002 the EU was in the sixth place.


Brazil, in turn, appeared in 2004, for the second consecutive year, at the top of the list of bovine meat exporters. The country sold 1.854 million tons in the international market, according to information from the National Confederation of Agriculture and Livestock (CNA).


In 2003 there were 1.3 million tons exported and 1 million tons in the previous year. In 2002, Brazil occupied the third place in the ranking. The country, however, gained two positions and overtook Australia, which until 2002 was the greatest world beef exporter, with 1.366 million tons.


From 2002 to 2003, Australia’s sales dropped to 1.264 million tons, but in 2004 went back to 1.395 million tons. The country of the kangaroos, however, didn’t manage to recover the main place in the list due to Brazil’s sharp increase.


Inexpensive Steer


According to Camardelli, one of the foreigners’ interests in national livestock is the low cost. The arroba is currently sold in Brazil at about US$ 20, which makes cost of the kilogram of beef a little over US$ 1.


“In the United States the price is double that,” says the technical advisor at CNA, Paulo Sérgio Mustefaga. “Brazil is unbeatable in production cost,” states the technician at the National Food Supply Company (Conab) and professor at the Paraná Federal University, Eugênio Stefanelo.


The good climate conditions, the land availability and breeding cattle in pastures, according to Mustefaga, are some of the factors that allow for a low cost. “Today Brazil is the country with the best conditions of becoming the great world beef supplier, we have quality and price,” states the advisor at CNA.


This has made world competitors fearful of Brazil and at the same time interested in making investments. “I cannot state that the arrival of foreigners in national cattle breeding is a tendency, but certainly the great companies in the sector have their eye in Brazil,” says Mustefaga.


The president at the Australian Brazilian Chamber of Commerce, Hélio Marchi, states that he doesn’t know of Australians investing in Brazilian slaughterhouses, but that they have shown themselves interested in working together with Brazilians in bovine genetics, area in which Australia is one of the world references.


Stefanelo states that the buying countries are looking to diversify their suppliers in the foodstuff field, to become less susceptible to problems of sanitation or politics for example, and that has contributed for Brazil to win new markets.


The Arab countries are some of those who started buying more beef from Brazil in the last few years, with the drop in sales from suppliers like the European Union (EU), traditional trade partner in the region.


Egypt, for example, appears as the second greatest in natura Brazilian beef importer in July this year, with 20,900 tons purchased, which means US$ 39 million.


In the same month last year, the Egyptians were the greatest buyers, with 8,100 tons or US$ 11.2 million. Algeria was the fourth largest international client for Brazilian in natura beef in July this year, with 7,100 tons against 3,700 in the same month in 2004.


Shipments


Brazil exported in July 158,000 tons of beef, including in natura, industrialized and giblets, which meant an increase in 47.57% over the seventh month last year.


Between January and July, the volume sold reached 1.299 million tons, 35% more than the 965,000 tons traded in the first seven months in 2004. The revenue for the period was of US$ 1.752 billion, 33% more than in January to July in the previous year.


The main destination of in natura beef was Russia, with US$ 296 million and the greatest buyer of industrialized beef was the United States, with US$ 85 million.


According to the projections made by the CNA president, Antenor Nogueira, until the end of the year Brazil’s revenues should reach US$ 3 billion with bovine meat exports.


Anba – www.anba.com.br

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  • Guest

    george.ferre@ridleyinc.com
    What is or has been the average cost of raising a steer and bring it to market size in Brazil?
    Thanks,
    George Ferre

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