According to the latest Brazil Ministry of Industry, Foreign Trade, and Services data, Brazilian beef export prices this August plunged to their lowest levels since Jan-21, at USD 4.51 per kilogram (kg). This level represents declines of 5% month-over-month (MoM) and 26% year-over-year (YoY). These prices correspond to beef exports “in natura,” that is, excluding derived beef products.
Most of the decline corresponds to falling prices in China. Beef export prices to China averaged USD 4.46/kg, representing a 7% MoM decrease and a fall of 33% YoY. Among the top ten export destinations, China suffered the steepest price decline in YoY terms. Albeit at a slower pace, the rest of the top ten destinations also experienced YoY price declines , except the United States (US), to which exports were priced 8% higher YoY.
Meanwhile, in August, export volume directed to China, the largest destination for Brazilian beef totaled 114 thousand mt. These numbers represent a YoY decline of 12% or 16.3 thousand mt. This loss of 16.3 thousand mt represents almost half of the total gross losses in Brazil’s exports during August. The decline in exports to China was followed by decreases of 7.6 thousand mt to Indonesia and 2.0 thousand mt to Israel. These were somewhat offset by gains from Egypt (+4.2 thousand mt), Chile (+3.8) thousand mt, and Libya (1.3 thousand mt).
The steeper price and volume decline compared to the rest of the destinations continue to signal that demand in China for Brazilian beef is softening. Last month, Tridge reported that slower-than-expected exports during July (breaking seasonality), along with a price decline, were pointing to a drop in Chinese demand.
Behind China’s weaker demand are: a weak Chinese Yuan coupled with a strong Brazilian real; an increase in domestic beef production (reducing the need for imported beef); and China’s lower prices disincentivizing Brazilian exports toward that particular destination.
As for the currencies, in August, in USD terms, the Chinese yuan averaged its lowest level in decades, down 6% from the previous year. In the meantime, the Brazilian real strengthened 5% YoY. The combined effect resulted in China’s yuan losing 11% of its value in terms of Brazilian real.
In addition, as other countries offer higher prices or suffer from lower price declines, they are gaining some of China’s share. For example, exports to Chile, which is paying a higher average price than China and only recorded a 1% YoY decline, are increasing.
In the meantime, China’s beef production is increasing, predicted to rise by 4% YoY this 2023 by the United States Department of Agriculture (USDA). This reduces the need for imported beef.
Moving forward, export prices should continue declining according to their recent history until the end of the year. Nonetheless, they are now below their five-year average, which signals there is not much downside room. Global production is expected to register a net gain this year, with increases in Brazil, Australia, China, and others more than offsetting losses in the US and Europe.
Source: Tridge and Brazil Ministry of Industry, Foreign Trade, and Services