Cheap beef from Brazil to increase; here's why it shouldn't hurt Australia

Yet there seems little concern that big shiploads of cheap Brazilian beef will cut into the much-touted potential from tightening United States supply that Australia is placing much hope on.

While China and the US are Brazil's two big customers and also in Australia's top four, and there are many other smaller markets who buy from both Brazil and Australia, the two beef exporters rarely play in the same space, analysts have explained.

In particular, Brazilian exports to the US are heavily constrained by a lack of market access.

The US Department of Agriculture's Foreign Agricultural Service, in its annual September-released forecasts, has Brazil exporting 3.40 million tonnes in 2024, which accounts for 30 per cent of its production. It says: "This forecast considers increased production, strong external demand for beef and competitors facing challenges with production."

By comparison, the FAS forecasts for Australian beef exports in 2024 are 1.6m tonnes, which would be the fourth highest on record.

Meat & Livestock Australia's global supply analyst Tim Jackson said Brazil was currently in a destocking period, although a fairly soft one, on the back of seasons starting to dry out.

"Analysts in Brazil are saying they expect production to peak sometime around late 2024 or early 2025," he said.

Weak domestic beef consumption in Brazil fueled by relatively soft consumer purchasing power had seen a shift towards increased exports - a trend occurring over and above cyclic production, Mr Jackson explained.

"Their production outside of cyclical changes hasn't moved much over past decade. The big increase in Brazilian exports is related to increased purchasing power in places like China," he said.

"Their exchange rate has been trending down since 2014 so export markets have become more attractive."

Despite Brazilian exports to China being suspended in February due to an atypical BSE case, volumes have recovered, Rabobank's latest Global Beef Quarterly said.

Their shipments to China in June were in fact the second largest in history.

To a limited degree, Australia does compete with Brazilian beef in China, Mr Jackson said.

"And there are many other countries we export to like Vietnam and the Middle East that Brazil supplies also.

"However, most Brazilian exports are frozen and often described as commodity grade, as opposed to branded or differentiated, so even in markets where we both have a presence the beef tends to enter into different niches."

From 2019 to now, about 20pc of Australian exports have gone to China, 24pc to Japan, 19pc to the US and 16pc to South Korea.

Brazil is unable to export into Japan and South Korea due to a lack of market access.

In the US, Brazil is constrained by the lack of a free trade agreement. It exports under a 50,000t 'all other' quota, after which it incurs a 24.6pc tariff.

"While the competition is rarely direct, what happens in Brazil ultimately is of consequence to Australia because supply of Brazilian beef on the global market affects prices," Mr Jackson said.

"But a countervailing trend is that global protein demand is rising. It's not a static environment so it has been difficult to see the impact that rising Brazilian exports is having."