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Trade4go
Jan 24th, 2025
Original content
The European Union (EU) has established a USD 1.04 billion (EUR 1 billion) safety net to compensate farmers potentially affected by the EU-Mercosur trade agreement, underscoring its commitment to safeguarding the agricultural sector. The European Commission (EC) assured the European Parliament (EP) that the agreement is designed to minimize market disruptions, with contingency measures in place to ensure stability for rural areas. Specifically for beef, the agreement introduces a 99 thousand metric ton (mt) quota at a reduced 7.5% tariff, phased in over seven years and split between fresh (55%) and frozen meat (45%). Additionally, bilateral safeguards will protect against economic harm caused by increased imports, reflecting the EU's proactive approach to balancing trade liberalization with agricultural sector resilience.
Brazilian meat processing plants under the Federal Inspection Service (SIF) slaughtered a record 28.3 million cattle in 2024, marking a 3.3 million increase from 2023 and surpassing the previous record of 27 million cattle in 2014. With an average carcass weight of 260.5 kilograms (kg), beef production reached 7.37 million metric tons (mmt), a 13.2% increase from 2023. Of the total beef output, 48% were exported, up from 44% in 2023. These plants accounted for 76% of Brazil’s total beef production, and 36.6% of the meat produced in inspected slaughterhouses was exported. However, the growth in cattle slaughter started to slow in the final months of 2024, with Nov-24 and Dec-24 showing signs of decline compared to the corresponding months in 2023.
Driven by rapid economic growth, urbanization, and improving living standards, China's growing demand for beef has made it the world's largest beef importer. The United States Department of Agriculture (USDA) expects China's beef imports to reach 3.9 mmt in 2025, a 30% increase from 2020. Despite launching a World Trade Organization (WTO) investigation into the impact on local producers, China's beef imports remain strong. However, competition is rising from the United States (US), whose beef production is declining due to herd shrinkage following a prolonged drought. The US is expected to import more than 2 mmt of beef in 2025, creating a significant gap in its trade balance. Brazil is poised to benefit from this global demand, with its competitive advantages stemming from lower production costs, a devalued real, and a favorable export quota. Notably, as of January 13, 2025, Brazil had already met 88% of its 65 thousand mt quota for tariff-free exports.
Germany is facing significant economic losses, exceeding USD 1.04 billion (EUR 1 billion), due to the recent outbreak of foot-and-mouth disease (FMD) in Brandenburg, which resulted in the death of three buffaloes, the first case in the country since 1988. The impact affects the entire value chain, including cattle breeders and local beef producers. The outbreak has led to trade restrictions, with countries such as Russia, Australia, Kazakhstan, and South Korea imposing bans on German livestock products. Russia had already halted the supply of German products, citing weak EU livestock movement controls as a contributing factor. Meanwhile, several EU countries, including Belgium, Ireland, the Netherlands, and Poland, have strengthened their import controls.
South Korea’s Ministry of Agriculture, Food and Rural Affairs (MAFRA) plans to pilot the sale and distribution of Hanwoo cattle with a shortened breeding period as part of efforts to stabilize the supply and demand of livestock products. The goal is to reduce the current breeding period in South Korea from 30 months to 24 months, aligning more closely with the 18-month average in countries like the US and Australia. Shortening the breeding period could lower feed costs, reduce greenhouse gas emissions, and potentially make Hanwoo beef more affordable, stimulating consumption. Kangwon National University research suggests that this change could reduce feed costs by 32% and emissions by 25%. However, farmers are cautious, expressing concerns that the shortened period might reduce profitability, impact meat quality, and affect Hanwoo's distinct taste. There are also calls for more research to determine if the breeding period should vary depending on individual cattle characteristics, especially given consumer expectations of Hanwoo beef's flavor at older ages.
In W3, Brazil's wholesale price for boneless rear beef declined slightly by 0.19% week-on-week (WoW) to USD 4.65/kg. This also reflects a 4.67% month-on-month (MoM) and 8.34% year-on-year (YoY) drop. Prices in Brazilian real remained stable at BRL 28/kg for the third consecutive week, with exchange rate fluctuations influencing USD pricing. Safras and Mercado emphasized limited room for price adjustments in the short term, given the reduced consumption demand in the second half of Jan-25. Market experts noted that consumer preferences are shifting toward more affordable protein options, such as beef forequarter cuts, chicken, eggs, and sausages, which align with the population's constrained purchasing power. While strong export performance helps drain the domestic market and support prices, significant domestic price increases remain unlikely due to the population's limited buying capacity, shaping the market's dynamics.
Australia’s National Young Cattle Indicator averaged USD 2.31/kg in W3, showing a 6.45% WoW rise, a 0.43% MoM increase, and a 7.44% YoY growth. According to Meat and Livestock Australia (MLA), the cattle market began 2025 with robust activity, marked by a high supply of 87.78 thousand heads, the largest yarding since Apr-24 and the third largest in the past 12 months. Restocker steers maintained a premium over feeder and heavy steers, with restocker heifers following a similar growth trend. Processor cow prices remained stable, but the indicator’s marginal price increase returned it to 2023 levels, its highest point in two years, bolstered by record-breaking US 90% lean red meat and 10% fat (90 CL) import prices.
In W3, the US price for lean beef (92% to 94%) averaged USD 7.77/kg, marking a 3.19% WoW increase and the second consecutive weekly rise after 17 weeks of decline. This resurgence could be attributed to a recovering demand following a seasonal winter slowdown. This price level also represented a 4.72% MoM rise and a significant 27.17% YoY increase. The YoY surge reflects a tightening domestic supply due to a shrinking cow herd, while limited production continues to sustain high lean beef prices.
In W3, Argentina's average steer beef price rose to USD 2.14/kg, reflecting a 2.61% WoW increase and a significant 34% YoY rise. However, the price marked a 7.59% MoM drop likely due to elevated holiday demand in Dec-24. It is worth noting that Argentina's beef consumption faced severe challenges in 2024, with economic pressures driving a 12% YoY decline, marking the worst year for sales in two decades. Per capita consumption fell to 47.4 kg, an 11.1% drop from 2023. Apparent domestic consumption totaled 2.038 mmt, down 10.1% from 2023, reaching a 22-year low.
To ensure the sustainability of the European agricultural sector amid the EU-Mercosur trade deal, European farmers should adopt more flexible and diversified farming practices. This includes improving operational efficiency, investing in innovation, and focusing on sustainable farming methods to stay competitive despite the influx of beef imports. EU policymakers can enhance the safety net by creating targeted support programs for affected sectors, ensuring that subsidies are effectively distributed to vulnerable farmers, particularly those in rural areas.
As China’s beef demand rises, exporters, particularly from Brazil, should explore tailored strategies for accessing this growing market. They can leverage Brazil’s low-cost production advantage while ensuring that meat quality standards align with Chinese consumer preferences. Diversifying trade partnerships and enhancing logistics infrastructure can help meet the rising demand efficiently. Additionally, it’s crucial for beef exporters to monitor regulatory changes in China, especially concerning WTO investigations, to avoid trade disruptions. This calls for active engagement with Chinese authorities and continuous adaptation to meet market dynamics and ensure sustainable growth.
The South Korean government should collaborate with academic institutions and industry experts to conduct comprehensive research on the effects of shortened breeding periods on Hanwoo cattle. It is essential to strike a balance between improving efficiency and maintaining the high quality and distinctive taste of Hanwoo beef, which is crucial for consumer satisfaction. Farmers should be encouraged to adopt this practice gradually, with support provided for those facing challenges in adjusting to new breeding protocols. Additionally, the government can help offset potential profitability concerns through subsidies or incentives for adopting sustainable practices, ultimately benefiting both the environment and the industry.
Sources: Tridge, Agromeat, Agrotypos, Bichos de campo, Nongmin, Rosng
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