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World beef report
Information and analysis of Livestock markets
Issue: 772
Date: Wednesday, November 5th, 2008
Editor: Eduardo Blasina
The US surpasses Russia as main Uruguayan beef buyer
Negotiations on E.coli between Uruguay and the US progress
Brazilian beef exports fall 15% in October
Marfrig announces new purchases while other Brazilian companies ask for help
New record in Argentine cow slaughter
The US to import more beef in 2009
End of year fall of Russian beef consumption expected

Uruguay
Beef average FOB price falls 13% in October
Uruguay - Beef FOB values
• For the first time in fourteen months (since August 2007), Uruguayan beef exports to the US surpassed those destined to Russia. Both, however, were displaced by the European Union which turned into the leading destination in the month. At the same time, a strong contraction According to data provided by Customs, in October, Uruguay exported 16,375 tons of refrigerated beef valued in US$ 83.4 million at an average FOB price of US$/t 5,094. The volume was 8.7% above September but the average price fell 12.9%. Consequently, the monthly changes in the market since August. Chilled beef • Export average price reflected the strong averaged US$/t 13,189, 13.5% below September drops of international markets. It contracted 13% while frozen averaged US$/t 6,821, 15% below in the case of Russia to US$/t 3,283, which was September. The average fall would be more accompanied by a significant fall in volume to acute but for some increases on sales to Europe, just 2,267 tons, the lowest since July 2007. The strong drop on sales to Russia was somehow Other markets with fairly good volumes were compensated by an increase on sales to the US Venezuela with 1,337 tons and Hong Kong with which, as mentioned above, situated above 969 tons, both consolidating among best buyers However, if considered jointly, sales to the EU • Volumes of processed meat exports are still were the highest in the month with 4,357 tons, low with the UK as the best client. In October it 38% above September and almost trebling the was the destination of 635 tons, 65% of the total. After the drops suffered by refrigerated counterweighted by a notable fall on FOB average beef prices, it is certain that shipments of price, something expected due to the radical Blasina & Tardáguila Consultores Asociados. Montevideo, Uruguay Uruguay - Beef and byproducts exports
Uruguay - FOB value of chilled exports to the
Total fresh beef
Chilled beef
Ene Feb Mar Abr May Jun Jul Ago Sep Oct Nov Dic Frozen beef
• In the first ten months of the year, Uruguay exported 222,267 tons of beef, much the same Frozen boneless volume of equal period 2007. The average FOB price, meanwhile, was US$/t 5,066, 61% above High ranking officials travel to the US for
E.Coli issue
The Director of Animal Industry, Héctor Lazaneo, and the member of Cattle Services. Jorge Armstrong, start today a series of contacts in the US aiming to “remove any doubts” with respect to the sanitary equivalence agreement Offal
signed late last year between sanitary authorities of both countries, which concerns to a potential E.coli contamination, commented to Radio Rural Tripe, stomachs,
Francisco Muzzio, Director General of Cattle etc
Services. The trip was agreed in a meeting between industrial unions and members of INAC Processed
Though in Uruguay they are sure that the issue will be solved promptly, some importers keep doubts that inhibit them from buying Uruguayan TOTAL GENERAL
beef afraid of a possible recall. Muzzio said he Source: based in Customs/Urunet agreed with US sanitary authorities that any that several Uruguayan meatpackers already eventual appearance of E.coli in a Uruguayan shipment should be “first reported to Cattle Services of Uruguay, who will proceed to inspect • The market for finished cattle continues extremely blocked, with just few packers passing buying prices. Most maintain the attitude of The agreement indicates that if the feared bacteria is present, the entire “lot” will be retired. booking lots for 15-20 days without fixing prices. The doubt remains in the definition of “lot”, but However, price drops have been softer than in Muzzio explained that “in most cases” is one day previous weeks. During the past two months of production. “The doubt – he expressed – is if heavy steer quotations dropped between US$ one lot sails on different days, which may 0.15 and 0.25/kg cw each week. In this last, if generate an important recall, but the industry compared with the beginning of the previous, prices fell between 5 and 10 cents. The few He concluded by saying that “it is a commercial plants passing prices offer between US$ 1.90 and issue, more than any other thing”, and remarked 1.95/kg cw for special steers, when in the past were paying US$ 2.00. In some punctual cases of Blasina & Tardáguila Consultores Asociados. Montevideo, Uruguay Uruguay - Slaughter and Exports
Total Slaughter from
26/10 - 1/11
H eads per category
Slaughterhouse
Year to date
% Total
Last w eek
Distribution of slaughter (percentage)
W eekly beef exports by destination (ton c.w )
* includes Puerto Rico; ** includes Chile special lots the last reference could still be for ovine meat. There are no plants passing reached. These have relatively short terms of no prices for adult categories while heavy lambs are more than a week. Those applying this strategy paid between US$ 2.30 and 2.40/kg carcass buy cattle to slaughter in the next week. Prices for cows oscillate around US$ 1.65/kg cw. Slaughter
• Supply is far from abundant but still surpasses • Cattle slaughter fell during the past week. demand. Lack of rains is a factor that still puts After four weeks of gradual increases, in the past pressure on many producers, especially in the – according to information issued by the National southern region. However, there’s no significant Meat Institute (INAC) – incoming cattle totaled selling pressure. If the relative stability of 29,853 head, 11.8% below the previous and 9% financial markets prevails, new export business below the same week 2007. Industry worker should slowly resume and allow the beef market strikes - Wednesday and Friday – had important repercussions in that sense. Besides, many • Meatpackers also reduced strongly its demand plants are inactive, some also for trade union Ovines: slaughter, prices and exports in Uruguay
Uruguay - Weekly steers and cows
Slaughter
slaughter
Slaughterhouse
In US$ cents/k lw; export lamb dwExps. in tons cw. Sources: own, INAC, MGAP & ACG Blasina & Tardáguila Consultores Asociados. Montevideo, Uruguay Mercosur Cattle View (US$ cents/kg)
Brazil - Monthly fresh beef exports
URUGUAY
ARGENTINA (live weight)
problems like Las Moras and others by market problems like Clademar and Sarubbi. slaughters (-24.5%) which totaled just 10,889 head, the lowest number in the year, while steers Cattle slaughter totaled 144,145 head in October, just 3.9% below September. Compared with October 2007 there’s a 16.4% increase BRAZIL (live weight)
(20,300 animals), but the descent is 25% (46,900 animals) when compared with October • Ovine activity during the past week accounted for 32,529 head, 31.8% below the previous and Brazil
Beef exports fell in October
Future steer prices
• According to data provided by the Overseas Trade Agency (Secex), Brazilian beef exports fell in October. Beef as well as swine and poultry meat exports suffered drops with respect to Restocker quotes
In the case of refrigerated beef, overseas sales totaled 89,300 tons valued in US$ 394.3 million at an average FOB price of US$/t 4,418. The Wholesaler
volume is 13.9% below September and 15.4% PARAGUAY (live weight)
reductions but most certainly reflects the contraction of international demand. However, the average price is not yet falling and increased o.9% in the month and 41.9% in the year. This • Some downward corrections again took place value will start to fall in November data. on Brazil’s finished cattle prices. However, the • In the 12 months to October, Brazil exported week also had positive trends, especially late last 1.08 million tons of beef, the lowest volume since week, with consistent improvements in the futures market. Notwithstanding, prices eyed more the stability on financial markets but cattle Blasina & Tardáguila Consultores Asociados. Montevideo, Uruguay World cattle prices
Steers in Uruguay
Estimated carcass price (US$/k)
Steers
Steers in San Pablo
Sources: Uruguayan operators, Mercado de Liniers SA, argentine operators, producers have good expectations on prices • JBS-Friboi announced its third quarter considering that supply is at this moment in its balance sheet which included enlargement plans on its slaughter and debonement capacity of its plants in Brazil, showing it bets strongly to an The week was as well positive for the Real, which improved again in its parity with the US$, increase of demand in 2009. The unit in Barra de slowly leaving behind the peaks of 2-3 weeks Garças, Mato grosso will pass from 1,300 daily back and nearing the R$/US$ 2.00 reference that head to 2,500 while its unit in Mato Grosso do some analysts estimate as the new balance for Sul will increase from 1,300 daily head to 3,000. Another unit located in Rondônia already enlarged its capacity from 900 to 2,200 head Marfrig confirms purchase of OSI Group
Marfrig and Comercio de Alimentos announced this week the purchase of the companies Moy Central Bank keeps interest rate unchanged
Pork in Europe and the OSI Group in Brazil for • The Committee for Monetary Policies of the US$ 680 million, after its approval by the Central Bank (Copom) decided Thursday to keep European Commission. For the purchase in the basic interest annual rate (Selic) unchanged Europe the group, following the laws of Northern in 13.75%. The decision disregarded the wishes Ireland, created Kilnway Limited which will of President Lula – who wanted the rate to fall – control actives in the continent. Moy Pork is the but at least took into account the government’s Brazil - Meat & leather exports
fourth company in the segment in Northern Ireland and also comprises plants in England, France and the Netherlands, reported Beefpoint. Brazilian companies bought by Marfrig-OSI include Brasio Produtos de Carne – supplier of fast food chains -, Penasul Alimentos – industry of pork and poultry products – and Agrofrango Industria e Comercio de Alimentos – a chicken JBS-Friboi invests on instalation
enlargements
Blasina & Tardáguila Consultores Asociados. Montevideo, Uruguay wing that rejected a new drop, informed Estado generated by units that stopped their activities – de Sao Paulo. The committee said that the some R$ 7 million (US$ 3.24 million) – not to be decision was taken considering the environment shared by active units. Sharing the “damage” is of big economic uncertainty generated by the a consequence of the tributary system that collects the Product and Services Circulation Tax Good expectations despite the crisis
(ICMS). All units in the sector must pay a • According to two industrial representatives predetermined amount based on its billings. If, cited by Beefpoint, the beef industry sector is for some reason, the amount is not reached, the optimistic with respect to 2009 projections difference must be shared by the rest of the despite the unfavorable international context. “In units. ICMS will collect in Mato Grosso some R$ a scenario that runs beside a credit crisis, cost- 109 million during the current year but five effectiveness in the beef production chain inactive plants generate a R$ 7 million debt that improved”, affirmed the president of the Beef Exporter’s Association, Roberto Gianetti da “We can’t assume debts of closed units as the Fonseca, referring to the US$ exchange rate industry goes through a very delicate moment increase. “Cattlemen have good prices; though and this will complicate even more the situation somewhat lower, it’s still well paid”, he said. He and produce more closures”, warned Sindifrigo’s added that “meatpackers have better margins; president, Luis Antonio Freitas Martins, cited by for each dollar exported they get more Reales Sadia and Perdigâo announce losses
• On his side, the president of the Beef Industry • The two biggest beef processors in the Union of Rio Grande do Sul (Sicaderg), Ronei country, Sadia and Perdigâo announced net Lauxen, maintains his projections of recovery of losses during the third quarter, unlike gains the state’s sector despite the international during the same quarter in the past year. While scenario and cattle shortages. “In 2006 we had a Sadia announced losses for US$ 365 million, production peak and in following years we Perdigâo admitted US$ 11.6 million. Mentioned register falls on our exports; we had many as main reason for these negative results is the closures. In 2009 the crisis may partly endanger US dollar depreciation against the Real in the our recovery, but there are no intentions to grant concessions”, he said in a radio program. Alimentos Estrela asks for financial help
Futures steer price up in October
• Meatpacker Alimentos Estrela is one of the • Finished steer was the only of the six agrarian first to ask for help to the National Economic and contracts that operate in Sao Paulo’s BM&F that Social Development Bank (BNDES) and other closed October with an upward trend, says a public banks to face the crisis. Loan contracts are survey of Valor Económico. October contracts already finished and signed by all parties grew 1.51% late in the month to R$/@ 92.06, involved, but banks wait for a clearer sign about equivalent to R$ 3.07/kg (US$ 1.42). The beef demand in the future, said Rafael Torres, increase occurred despite the falls registered marketing manager of the company. “We are during the second half of the month, after news of possible Russian shipment devolutions started governmental aid is close”, Torres added, cited Russian sanitary mission arrived last week
The company – who is currently using 25% of its • Russian sanitary authorities disembarked last slaughter capacity – faced difficulties in week in Brazil and expect to audit production and September, when credit lines to exporters were industrial establishments as well as veterinarian suddenly stopped as a consequence of the units. The issues under inspection include bovine, international financial crisis. This generated swine and chicken production in all states with a payment delays to providers, which was followed F&MD-free status with or without vaccination. Mato Grosso meatpackers ask for financial
Argentina: cattle salughter and beef production
help to cope with the crisis
Representatives of the beef industry in Mato Grosso met with a state economic team to ask for help to avoid more plant closures. The State Beef Industry Union (Sindifrigo) asks for debts Heads, OTH kilograms and th tons cwtSource: ONCCA Blasina & Tardáguila Consultores Asociados. Montevideo, Uruguay Argentina - Volume approved for exports in 2008
PROCESSED
COW FOR PROCESSING
Argentina - Monthly cattle
slaughter
327.894,94
168.537,11
101.928,55
68.637,41
Source: ONCCA; beef in tons carcass weight eq, offals in swt and heads of cattle Argentina - Beef authorized for exports
Argentina
Cow slaughter reaches another record
• Cow slaughter in July – August reached 25% of the total – a new historical record – informed Oncca in its last monthly report. The number of female cattle slaughtered in August – 314,009 – was 5.8% above the same month 2007. In July the number was 345,924 head, the biggest advantage of the historic high prices of the past registered since 2001 and 18.8% above the same month 2007. Accumulated to August, the number ONCCA informs of more export certificates
of cows – 2,011,516 – was 5.9% above the equal in October
A report from ONCCA informs that in October it slaughtered. These numbers are a consequence issued ROEs (Export registers) equivalent to of liquidation processes on dairy farms and 61,845 carcass weight tons, the bulkiest reduction and dismantling of breeding herds affected by the drought, which adds to low prices excludes industrial cows as well as offal and generated by governmental decisions to restrain Warns about negative perspectives in the
• Prices of finished cattle keep the notorious next two months
downward trend in Argentina. Cattle sold in • Beef exports in November and December are Liniers salesyard and that destined to the local expected to be very low and with an important market and heavy export steers all suffered overstock on major country packers, declared to significant drops on its reference prices. These Infocampo the adviser Víctor Tonelli. “External are even bigger in US$ as the Argentine Peso beef demand disappeared and this will be felt again devaluated, in this case 2.4% in the week. strongly in November and December; only in January the situation will tend to slowly recover”, North America
the specialist said. “An important overstock will US beef imports may increase 15% in 2009
occur and this will bring cattle prices to very low • The latest quarterly outlook published by US levels”, and added that “meatpackers that may based Steiner Consulting Group (SCG) reveals not face the situation will have to negotiate some that US beef imports in 2009 may increase by kind of subsidy to keep their workers”. around 15% on this year’s low levels. This is • The situation is already observed, said an largely due to expectations that the US$ will executive of the beef sector who added that remain strong; trading conditions experienced in “purchase orders are totally paralyzed and other markets will be difficult; and US beef relationships with the few buyers still remaining deteriorates day after day”. In a statement to Given the significant decline in import volumes Infocampo he considered as “a shame that for this year, Australian imported 90CL cow beef political reasons we were unable to take prices in the US for 2008 are expected to rise Blasina & Tardáguila Consultores Asociados. Montevideo, Uruguay NAFTA Markets
Cattle (US$/k)
Month Var month % Cattle (US$/k)
Import price US$/ton, frozen, boneless )
Trimmings 90
USA: Selected primal cuts US$ / Ton
Montreal Wholesale Prices (US$/k)
CME futures - Live Cattle (US$/k)
Sources: USA: USDA and CME. Canada: Cattle: USDA; Import prices: Department of Foreign Affairs and International Trade Wholesale Prices: Agriculture and Agri Food Canada 19.6% on 2007 levels, to average US¢/lb 160.48 Brazil —5%—, Argentina —20%—and the United FOB (US landed, forward price). Prices over the States —10%— outweigh decreases from next couple of months, however, are expected to ease from the record levels set earlier this year, to US¢/lb 155 and US¢/lb 152 FOB in November and December, respectively. Following tight US Trade Representative Office eyeing EU
supplies of imported beef this year and the product duties in beef hormones dispute
resulting high prices in the US, SCG is predicting • The Office of the US Trade Representative that Australian 90CL cow beef prices will ease announced Friday it is seeking public comment 3.9% in 2009, to average US¢/lb 154.25 FOB (US on modifying the list of European products subject to increased tariffs in connection with Despite the decline in US imported manufacturing World Trade Organization (WTO) settlement beef prices (in US$ terms) forecast for 2009, rulings in the EU beef hormones dispute. Australian cow prices should hold firm going into Modifications could involve the products subject 2009 on the premise that the A$ remains low to increased duties, the level of increased duties, against the US$, and that the Australian herd or the EU member States whose products are rebuilds – reducing the availability of female subject to the duties. In a report released on October 16, 2008, the WTO Appellate Body U.S. to import more beef in 2009
rejected the EU's claim and confirmed that the United States has a continuing right to impose The United States is expected to import 1.213 million metric tons of beef in 2009 — an increase FSIS provides new guidance to inspectors
of 82,000 metric tons, or 7 percent, from 2008 — for E. coli testing in raw beef
but still less than it imported each year between • USDA's Food Safety and Inspection Service is 2004 and 2007, according to USDA statistics. providing new guidance to inspection program In a Livestock and Poultry World Markets and manufacturing trimmings and other raw ground Trade report released last week, USDA said the beef and patty components for E. coli O157:H7 increased U.S. imports are expected due to the testing. Currently, FSIS personnel are not to strengthening dollar and reduced cow slaughter which will tighten beef processing supplies. establishment has completed pre-shipment Blasina & Tardáguila Consultores Asociados. Montevideo, Uruguay USA - Import values
Australia & New Zealand
Financial crisis to curb Russian meat
consumption
• The global financial crisis is likely to lead to a 10% fall in Russian meat consumption by the end of 2008, compared to the first half of the year, says Interfax News Agency. Impacts of the global credit crunch are coming to light in Russia products on the market and rising demand for In US$/ton; n=no quote; Source: based in USDA cheaper meat items. Consumption of beef, the review for the sampled lot. Under this notice, most expensive meat in the Russian market, is FSIS, in many cases, will be collecting and expected to see the largest decline, while submitting samples to the laboratory before the consumption of poultry is likely to increase. establishment completes pre-shipment review. Russia limits meat import from Belgium,
Canada approves first vaccine against E.coli
Brazil, Denmark and the US
• The Canadian Food Inspection Agency (CFIA) approved last week the use of the first world’s (Rosselkhoznadzor) has imposed a temporary vaccine against E.coli O157:H7, which received ban on meat import to Russia from twelve on February a provisional license from the US companies of Belgium, Brazil, Denmark and the Department of Agriculture (USDA), reported United States effective October 28, according to Eurocarne. The vaccine – developed by the the Russian news agency Itar-Tass. Listeriosis University of British Columbia (UBC), the Alberta disease germs, intestinal infection germs, Research Council (ARC), the University of tetracycline antibiotics and anti-parasitic Saskatchewan’s Vaccine and Infectious Disease medicines were detected in the meat products, a Organization (VIDO) and the Canadian Rosselkhoznadzor source told Itar-Tass on pharmaceutical company Bioniche Life Sciences Friday. According to USDA, Russia banned Inc. – prevents the E.coli O157:H7 bacteria from poultry imports from Allen Family Foods in sticking to the intestine of cattle, reducing its Hurlock, Maryland, effective October 28. USDA reproduction in the animal and diminishing the Meatingplace.com, USDA has not posted any • Prices in the US beef complex once more Move to raise age for cattle's BSE tests
improved during the past week. Carried by Proposals have been made to raise the age expectancies of a rather scarce offer for the next above which cattle must be tested for BSE. The few weeks, which add to the main financial consultation has been launched by Defra, the indicators, beef cut prices as well as finished cattle tend upwards. The same happened in the Chicago Mercantile Exchange, where futures proposals, the age above which all cattle prices for finished steers went up in a fairly slaughtered for human consumption and all fallen stock must be tested for BSE would rise to However, clouds arrived this week from the beef 48 months. If the changes are agreed then the industry side. Though beef price climbed, new rules would come into place from January industrial operating margins seem to be negative. • Reference values for imported beef published by the USDA again fell last week. Demand is still Commission proposes €100 million
extremely poor and prices for differed deliveries additional fund to eradicate “blue tongue”
continue to quote with big discounts with respect • The European Commission (EC) is ready to propose early next year an additional € 100 million fund to help eradicate the “blue tongue” disease. In this way, the EC will supply between Blasina & Tardáguila Consultores Asociados. Montevideo, Uruguay Australia Beef Export Prices
Prices to Japan (C.I.F)
Chilled
Exchange rates
Frozen
To US (C.I.F.)
All currency/US$, except euro and pound, US$/curr.
Oceania
Australia cuts reference interest rate
2008 and 2009 near € 300 million to fight against • The Reserve Bank of Australia (RBA) decided the disease. The European Health Commissioner, yesterday to cut by 75 points the basic interest Androulla Vassiliou, reminded in a statement the rate to 5.25%. The Australian dollar, which big preoccupation that the disease generates in recovered last week part of the previously lost European cattlemen and authorities and indicated terrain, returned once more to a downward that “the extensive vaccination will stop the trend. It devaluated yesterday a further 3% in its disease and reduce its prevalence and effects”. European economic confidence plunges to
15-year low
PGG Wrightson ditched plan to buy Silver
Economic confidence in Europe plummeted in October to its lowest level since 1993, according Wrightson Ltd has ditched a NZ$ 220 million to a key survey released Thursday, adding to (US$129 million) plan to buy 50 percent of meat signs of a looming recession for the region, said processor Silver Fern Farms due to problems ANP. The European Commission's closely-watched economic sentiment indicator (ESI) for the 15- The company last month was forced to delay the deal after funding promised by a number of September to 80.4 October in the wake of share banks fell through due to the global credit crisis. market chaos that has helped to fuel the Canceling the deal was necessary to provide deepening sense of economic gloom facing the certainty to shareholders, said Keith Cooper, currency bloc.The release of the commission's chief executive of Silver Fern Farms, a sheep and latest survey comes just one week before the beef meat processing co-operative owned by European Central Bank is expected to cut interest farmers, though the two groups would still look rates to help shore up investor and economic for ways to work together. "It enables us to feasible," Cooper said in a statement, quoting by Blasina & Tardáguila Consultores Asociados. Montevideo, Uruguay

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