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BRAZILIAN BEEF CATTLEMARKET OVERVIEW
Eng. Agr. José Luís Souza de [email protected]
OKLAHOMA GROUP VISITFEBRUARY / 2006
Presentation Scheme
Introduction & FiguresLocal Breeding SystemsBeef Cattle MarketBrazil X International MarketFinal Notes
Presentation Scheme
Introduction & FiguresLocal Breeding SystemsLocal Breeding SystemsLocal Breeding SystemsBeef Cattle MarketBeef Cattle MarketBeef Cattle MarketBrazil X International MarketBrazil X International MarketBrazil X International MarketFinal NotesFinal NotesFinal Notes
Introduction
Largest commercial cattle stock worldwide (165M of heads)89M acres of pastures (native and cultivated)1.79M beef cattle producersLargest beef exporter worldwideSecond largest beef producer worldwideHigh technology
154,1 152,8 154,6 158,3 161165,8
170,3175,1 176,2
170,2165
100
150
200
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Brazilian Livestock Balance
Apr. 80% Beef Cattle
CATTLE STOCK (millions of heads)
Source: FNP Consultancy
** Forecast
**
14%
- 6%
154,1 152,8 154,6 158,3 161 165,8 170,3 175,1 176,2 170,2 165
36,9 36,7 33,8 34,3 34,9 35,6 36,8 38,5 41,5 47 45,5
0
50
100
150
200
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Cattle Stock Slaughtering
Brazilian Livestock Balance
27.6%
Apr. 80% Beef Cattle
STOCK X SLAUGHTERING (millions of heads)
Source: FNP Consultancy
*
* Forecast
39%
Brazilian Livestock Balance
0100020003000400050006000700080009000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Beef Production Export Import
19.2%
0.6%
Source: FNP Consultancy
PRODUCTION, EXP. & IMP. (1000 ton Carcass eq.)
6.2%1.4%
Brazilian Livestock Balance
Source: FNP Consultancy;
SECEX; DECEX
0200400600800
10001200140016001800
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Export Import
334%
- 56%
EXPORT AND IMPORT (1000 ton Carcass eq.)
Brazilian Livestock Balance
Source: FNP Consultancy;
SECEX; DECEX
0
200
400
600
800
1000
1200
1400
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Industrialized "In natura"
EXPORTS BALANCE (1000 ton Carcass eq.)
1078%
56%
Country % 20041 - UK 35 Exports -
Industrialized 2 - USA 32
1 - Russia 17 Exports – In natura (No bones) 2 – Egypt 12
1 - Paraguay 65 Imports 2 – Argentina 19
Brazilian Livestock BalanceEXPORTS (per Destination) X IMPORTS (per Origin)
Source: FNP Consultancy; SECEX; DECEX
+140 Countries34-2005
0%
5%
10%
15%
20%
25%
30%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Brazil Australia USA
Brazilian Livestock BalanceWORLD BEEF EXPORTS (MARKET SHARE)
Source: USDA, FNP Consultancy
430%
*
* Forecast
- 74%
Rising Exports
Local currency devaluation in 1999Main competitors presenting sanitary problems
Mad Cow Disease: UK, USA and CanadaFoot and Mouth Disease under control
Unexpected outbreak in 2005…Increasing demand (Asia, Eastern Europe, etc.)Idle capacity to supply this demand“Brazilian green beef” – Marketing strategies$3 billion in 2005 (forecast)
* Forecast
0%5%
10%15%20%25%30%35%40%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Brazil USA Russia
Brazilian Livestock Balance
Source: USDA, FNP Consultancy
WORLD BEEF IMPORTS (MARKET SHARE)
- 54%*
55%
World Per Capita Beef Consumption (2005 forecast)
Country Pound / hab./ yearArgentina 24.4
USA 19.4
Australia 16.1
Brazil 15.9 Canada 13.9
Mexico 10.2
EU 8.0
Russia 6.9
Source: USDA; FNP Consultancy
Presentation Scheme
Introduction & FiguresIntroduction & FiguresIntroduction & FiguresLocal Breeding SystemsBeef Cattle MarketBeef Cattle MarketBeef Cattle MarketBrazil X International MarketBrazil X International MarketBrazil X International MarketFinal NotesFinal NotesFinal Notes
Cross Breed X Pure Breed (Braford, Brangus, etc.)
Willing to combine the positive characteristicsHybrid Vigor (Heterosis)
Increase the resistance for diseases and ticks (South)Increase the meat softness and the early puberty of females (Center-North)
Cattle Raising Systems
Cow-Calf OperationNative pastures (South)Cultivated pastures (Center-North)
Stocker-Yearling and FinishingCultivated pastures
Full Cycle (Calving Finishing)15-20% cultivated winter pastures (South)100% cultivated pastures (Center-North)
FeedlotsUsually with own silage and/or hay production
Seasons / Ages
Spring Mating Oct/Dec to Jan/Mar Autumn Mating Mar/May to Jun/AugWeaning Mar or SepSlaughtering 1 - 3 years steers; culled cows or bulls and surplus heifers
Carrying Capacity / Stocking Rate
Native Pastures: 0.2 to 0.4 animal equivalent / acre
Cultivated Pastures:Southeast / Center-West / North:
Brachiarias and Panicuns: 0.4 to 0.6 an. eq. / acre
South:Consortium of Rye-grass, White Clover and Birdfoot Trifoil: 0.4 to 0.6 an. eq. / acreBlack Oat: 0.4 to 0.6 an. eq. / acre
0
50
100
150
200
250
300
350
400
450
500
aut/win spr/sum aut/win spr/sum aut/win spr/sum aut/win spr/sum aut/win spr/sum
Season
Wei
ght (
kg)
Carrying Capacity / Stocking Rate
“Roller Coaster Trend”Cold Winter - SouthDry Season - Center/North
HaySilage (sorghum, corn)
Winter Pastures (rye grass; whiteclover; birdfoot trifoil; black oat)
Pastures Supplementation
Eliminate “Roller Coaster Effect”Strategic handling; delivery all year long; contract performance, etc.
Carrying Capacity / Stocking Rate
Trading
SlaughteringIntermediate tradersSome small, tax dodging and inefficient beef abattoirs More than 20 medium-sized slaughterhouses have been sold or rented in 2003Still a few big beef abattoirs, seeking for respectability and scale:
Exports requirements; food safety, etc.Increasing professionalism and investments
Breeding stock Sold through live auction markets
Presentation Scheme
Introduction & FiguresIntroduction & FiguresIntroduction & FiguresLocal Breeding SystemsLocal Breeding SystemsLocal Breeding SystemsBeef Cattle MarketBrazil X International MarketBrazil X International MarketBrazil X International MarketFinal NotesFinal NotesFinal Notes
Beef Cattle Market
PASTSatisfactory profit marginExtremely high inflationSlaughtering 4-5 years steersLacking technology
Not much investments on pasturesLow stocking and extraction ratesNo cross breeding
Low productivity
Beef Cattle Market
1994 – 20001994 – Brazilian Economic Plan (REAL – R$)Steady growth of production costsDecreasing prices
Slaughterhouse X RanchersPoultry and pork competition
Profit margins under pressure!Low exports
Beef Cattle Market
SINCE 2000…Losing area to agriculture (soybean)Increasing females slaughtering
Decreasing stock (since 2003)Price falling pressure / Profit margins loweringMeat production increasing
Soaring exports (in natura) and new markets achieved
Prices ($ / Carcass pound)
0,4
0,5
0,6
0,7
0,8
0,9
1
1,1
1,2
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
- 47%
Source: IEA; FNP Consultancy
19%
Beef Cattle Market
TRENDSJeopardized grains profitability in 2005Rising prices / profitability
Calf shortageStock reduction (Brazil, Argentina and Uruguay)
Slight and steady growth of:Beef cattle stock Beef cattle exportsProduction costs
Beginning of a new positive cycle
Beef Cattle Market
OPPORTUNITIESSystematize and organize the leather market
10% of the global leather market85% damagedMind-set changing
Achieve best (high price) markets like USA, Japan, Australia by premium cut exports
Beef Cattle Market
THREATSWeak infra-structure
Poor internal transportation system: No railwaysIdle navigation capacityBad condition roads – Just 10% paved (OECD report); Center-West upwards
Port issuesLimited storage capacityA few professional slaughterhouses (possible cartel formation)
Beef Cattle Market
THREATSSanitary issuesFeeble contractsToo large and influent GovernmentBureaucracyFriendliness to the enviroment (Amazon Forest)
Production Costs 2004 ($ / produced pound)
Source: FNP Consultancy
0.350.250.280.250.450.30
5,000An. Eq.
0.650.620.390.550.380.690.43
500 An. Eq.
0.63Low inputStocker-Yearling and Finishing 0.63High input
0.63High input0.63Low inputCow-Calf
Operation
0.63High inputFeedlot0.63High input0.63Low inputFull Cycle
Sale Price ($/kg)
TechnologyBreeding System
Region: Mato Grosso do Sul
Production scale
Estimated Production Costsper Country
Source: Brazilian Agriculture Ministry
1.36Ireland0.86USA0.82Australia0.59Argentina0.56New Zealand0.43Brazil
$ / produced poundCountry
Presentation Scheme
Introduction & FiguresIntroduction & FiguresIntroduction & FiguresLocal Breeding SystemsLocal Breeding SystemsLocal Breeding SystemsBeef Cattle MarketBeef Cattle MarketBeef Cattle MarketBrazil X International MarketFinal NotesFinal NotesFinal Notes
Brazil X International Market
Largest cattle stock without “Foot and Mouth Disease” worldwide (90% of the stock). The goal is to be 100% free shortly.No BSE Disease level 1 (highly unlikable)Traceability
National Program since 2002Approximately a third of the herd meets this requirementMandatory for exporters
Brazil X International Market
Lowest production cost worldwideBrazil has some especial groups on the government to continue increasing the exports
BSE (Mad Cow) Disease preventionMarketing - “Brazilian Beef”Animal Sanitary Program
Subsidies and barriersCanada Russia, EU, Egypt
Competitive Advantages
Climate – 12 months on pasturesMore than 95% of breeding is on pasturesHormone & anabolic steroid freeNew frontiers – NorthLow production costs
Labor cost: foreman –$ 315/month 2006farm laborer –$ 200/month 2006
Low cost landsLarge areas / production scale
Competitive AdvantagesLAND VALUATION ($ per Acres)
0100200300400500600700800
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Pasture Areas Source: FNP ConsultancyRegion: Mato Grosso do Sul
- 78%
167%
Competitive Advantages
Split the productionCow-Calf Operation – poor soils / regionsRaising Heifers/Steers and Finishing – best soils / regions
Genetic Improvement ProgramsIncrease productivity by crossing breedsVital sector for the Brazilian economy –government attention!
Presentation Scheme
Introduction & FiguresIntroduction & FiguresIntroduction & FiguresLocal Breeding SystemsLocal Breeding SystemsLocal Breeding SystemsBeef Cattle MarketBeef Cattle MarketBeef Cattle MarketBrazil X International MarketBrazil X International MarketBrazil X International MarketFinal Notes
Final Notes
Significant potential for growingSince 1994 Profit margins under pressure
Trade in agriculture and related industries accounts for 40% of Brazil exports and in 2004 for 100% of the $34 billion trade surplus, a vital prop for an indebted economy still vulnerable to crises of confidence.“We have good rural producers; what we lack are rural entrepreneurs.” – ABCZ, world’s largest group of ranchers
Professionalism
Final Notes
FOCUS:
INCREASE PROFITABILITYINCREASE PROFITABILITY
SANITARY ISSUES!!!SANITARY ISSUES!!!
PARTNERSHIP &PARTNERSHIP &
PROFESSIONALISMPROFESSIONALISM
Questions?Thank you!
Contact:
José Luís Souza de CamposPhones: + 55 51 3330-3346 / 9268-5466 E-mail: [email protected]