Australia's loss could be Brazil's gain

by MEAT+POULTRY staff
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SYDNEY – Coping with market conditions that are all too familiar to US beef producers and processors, Australian processing companies have seen a three-year feast diminish to a proverbial beef famine, as historic drought conditions have resulted in the cattle supply there dropping to the lowest level in two decades. As reported by Reuters, at least two of the country’s biggest processors, Teys Australia and JBS Australia have been forced to idle slaughter plants and cut back production, opening the door for beef exporters in Brazil and Argentina to step up and stem any would-be shortages to global markets as prices continue creeping up.

Tom Maguire, general manager at Teys Australia – which is co-owned by Cargill – told Reuters that while the shrinking herd is a once-in-a-generation incident, “we can expect herd numbers to stay significantly low for at least the next two years as cattle producers rebuild.”

With more than 30 million head slaughtered in the past three years and the industry unable to replace the supply chain with more cattle, Australia’s biggest export partner, the United States, as well as China and Japan are expected to look to Brazil and Argentina to fill the void.

“If you look at Brazil, it has the potential to grow,” Matt Costello, animal protein analyst at Rabobank, said in the Reuters report. Rabobank forecasts a 6 percent increase in exports from Brazil in 2016. “It already has the largest cattle herd in the world and with the real depreciation, it can increase its global footprint.”

Meanwhile, Australia isn’t expected to keep up with export demand from China and the US is dealing with a supply shortage of its own. This also bodes well for Brazil.

“Australia and the US are who export the most there,” Antonio Camardelli, president of Brazil’s export association told Reuters. “But the United States, the more it exports the more it needs to import. Brazil can benefit from all of this.”
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