China’s blockade of Brazilian meat supposes losses of 1.800 million dollars for the country | Economy

The suspension of beef exports to China could mean losses of up to 1.8 billion dollars for Brazil if it lasts until the end of the year. In the best of cases, the Confederation of Agriculture and Livestock (CNA for its acronym in Portuguese) estimates that Brazilian producers would lose 1.2 billion dollars. The history of friction between Bolsonaro and the Chinese and the price of beef has been damaging the business for two months. China buys 56% of the beef that Brazil exports. The official reason for the blockade was the detection of two cattle that could have “mad cow” disease on September 3 in the states of Minas Gerais and Mato Grosso. The Chinese suspended the importation of meat the next day and have not yet reversed that decision, not even after the World Organization for Animal Health declared that, in relation to the disease, meat from Brazil represents an insignificant risk for human consumption. .

In addition to the technical and sanitary issue, there are at least three other elements that influence this matter, as some analysts and diplomats have informed EL PAÍS: the high price of meat, the attempt by the Chinese Government to stimulate traditional consumption of pigs instead of cattle and, to a lesser extent, a retaliation to the Government of Jair Bolsonaro for its hostility towards the Chinese. “At times, the president and those around him were very hard on China. Now everything is praise. But perhaps the past has interfered in the negotiations taking time to resume, ”a diplomat told EL PAÍS.

Until the middle of this year, the Brazilian president had a conflictive relationship with China. He even hinted that the country created the coronavirus and questioned the reliability of its vaccines, but recently changed its stance. At the BRICS summit on September 9, Bolsonaro raved about Xi Jinping and said that collaboration between the countries had been essential to control the covid-19 pandemic.

The loss estimate for Brazilian producers was made by CNA’s technical director, Bruno Lucchi. Its calculation takes into account the average of exports made to China in the last three months of the year, which range between 400 and 600 million dollars per month. “It is the period in which China buys more beef, to stock up for the Chinese New Year [que se celebra en febrero]”, Detailed the leader.

One of the complaints of the Chinese is the price of cattle. The price per arroba reached $ 59 in June of this year. Since the ban on Brazilian meat in September, the price of the arroba began to plummet. On October 28, it reached $ 45.8. It is the lowest value since October 2020, according to data from the Center for Advanced Studies in Applied Economics of the University of São Paulo.

“When you stop buying, it induces a decrease in value. This is what the Chinese government is doing, ”says Charles Andrew Tang, president of the Brazil-China Chamber of Commerce and Industry. In his opinion, when the market is more stable and China feels more secure in health matters, trade between the two countries will be restored.

Expensive food and prolonged drought

Lucchi explains that the price of the ox was high because the cost of feeding the animals has skyrocketed, as a consequence of the intense and prolonged drought that the country has experienced in recent years, and also because there was a retention of females to generate new calves. In 2019, a series of cow slaughter caused births to decline and disrupted the breeding and replacement cycle of cattle. “There is not as much offer as before,” he sums up.

No Brazilian trading partner has the capacity to occupy China’s space. According to the CNA, the Chinese buy 920,000 tons of Brazilian meat annually. Together, all other nations buy 900,000 tons. In theory, the meat that is not sold to China should be consumed by the Brazilians themselves.

This change in the destination of the protein has generated a reduction in the wholesale price, which has gone from 3 to 2.5 dollars a cut. However, until now, retailers have preferred to increase their profit margins rather than pass this reduction on to the end consumer. On the shelves of butchers and supermarkets, this reduction has hardly been noticed. The price has decreased only 0.31% in October, after 16 consecutive months of increases. The data come from the IPCA-15, the inflation forecast published by the Brazilian Institute of Geography and Statistics.

Given the uncertainty of the Chinese, on the 20th the Brazilian Ministry of Agriculture determined that the meat companies authorized to export to China should suspend production for the Asian country. Thus, the supply in the Brazilian market will increase and the price will end up falling.

On hold

However, according to the CNA, with the reduction of the value of the arroba and the increase of the raw material to feed confined cattle, producers have suffered great losses. If before they earned about 53 dollars per animal sold, now they lose about 88. “Those who can, will leave the cattle in the pasture until the situation returns to normal, and only then will they send them to the slaughterhouse,” says Lucchi. This retention, in the medium term, should increase the price.

In an attempt to reverse the temporary blocking of the purchase, the Minister of Agriculture, Tereza Cristina Dias, considered traveling to Beijing to negotiate with the local government. But they told him that for now it would not be necessary. Meanwhile, technicians from the Brazilian Ministry of Agriculture and the Chinese General Administration of Customs meet often to discuss the process to resume exports.

“These virtual meetings serve to clarify the procedures that have been implemented in Brazil to control the disease and provide the complementary information requested by Chinese technicians,” the Ministry explained in a statement. “Relations between Brazil and China are good, this problem will be overcome soon,” said Chang, from the Chamber of Commerce. More than half of Brazil’s beef exports depend on it.

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