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Trade4go
Dec 20th, 2024
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The European Union (EU) Commissioner for Animal Health and Welfare has called for stricter rules on live animal transport, with a new EU regulation planned for 2025. He urged member states to align on a common position by mid-2025, citing societal pressure and the need to enhance the agricultural sector’s reputation and competitiveness. However, EU member states have diverging views on the matter. Countries like Germany and Luxembourg advocate for stricter export controls, with Luxembourg even proposing a ban on live animal exports to nations lacking adequate animal welfare standards. In contrast, Spain and Romania express concerns about the economic impact on regions reliant on cross-border animal trade, arguing that such restrictions could disproportionately harm border and economically dependent areas. Meanwhile, Finland calls for a more tailored approach that accounts for national circumstances and prioritizes technical innovations to enhance animal welfare during transport.
On December 6, 2024, Mercosur and the EU finalized a trade agreement after over two decades of negotiations. The deal eliminates the 20% Hilton quota tariff on beef, saving Mercosur countries USD 100 million annually, with Argentina benefiting the most. It also introduced a 99 thousand metric tons (mt) quota with a 7.5% tariff, accommodating both grass- and grain-fed beef. However, fixed proportions for chilled and frozen meat may limit the economic value of this concession. The agreement is expected to generate USD 600 million for Mercosur, with Uruguay’s share depending on quota utilization.
The deal is now undergoing legal review and approval within the EU. It requires backing by 55% of member states, representing 65% of the population. While Germany and Spain support the deal, France opposes it, aiming to form a blocking minority. With 13% of the EU population, Italy holds a decisive vote. If approved by the EU Council and Parliament, the agreement will move to Mercosur states for final ratification, which could take several semesters.
The Belgian government is allocating USD 41.45 million (EUR 40 million) to compensate cattle and sheep farmers for the mandatory vaccination against bluetongue types 3 and 8, and epizootic hemorrhagic disease (EHD). These diseases have caused significant losses in 2024, with 23,000 sheep and nearly 36,000 cattle dying. The vaccination campaign aims to reduce mortality and prevent the spread of these diseases, which also have long-term effects on animal fertility.
The total cost of vaccinating cattle is approximately USD 25.91 (EUR 25) per animal, but the compensation per animal and how the EUR 40 million will be allocated remain unclear. With an estimated 2.2 million cattle and over 100,000 sheep in Belgium, the compensation will likely vary, with higher compensation expected for cattle due to their higher vaccination costs.
Brazil has introduced a National Plan for Individual Identification of Cattle and Buffaloes to enhance traceability through an individual identification system. This initiative will enable precise monitoring of each animal’s history, location, and movement, bolstering animal health programs, improving responses to disease outbreaks, and aligning with international sanitary standards to strengthen export potential.
The Brazilian government has welcomed Egypt's approval of a new health certificate model for beef, which now includes authorization for buffalo meat and offal. This development strengthens the commercial relationship with Egypt, Brazil's ninth-largest agricultural export destination in 2024, importing over USD 2.59 billion in agricultural products from Brazil in the first ten months of the year. With this announcement, Brazilian agribusiness has reached 208 market openings in 2024, bringing the total to 286 new business opportunities in 62 destinations since 2023. These achievements result from close collaboration between Brazil's Ministry of Agriculture and Livestock (Mapa) and the Ministry of Foreign Affairs (MRE).
According to the British Cattle Movement Service, the cattle population in the United Kingdom (UK) has decreased by 2% year-on-year (YoY) to 7.7 million heads as of October 1, 2024. Both beef and dairy cattle populations saw reductions, with beef cattle numbers falling by 1.8% YoY to 5 million and the dairy herd contracting by 2.5% to 2.8 million. The number of cattle aged over thirty months also dropped by 2% YoY, indicating a decrease in the breeding herd, particularly in beef cattle, which saw a 4% YoY reduction. Meanwhile, the number of cattle under thirty months declined by 2.2% YoY, pointing to tighter supply in the short term, with further declines expected in the longer term.
Despite these decreases, beef production in Oct-24 reached 92 thousand mt, the highest since 2012, with prime cattle throughput increasing by 5% compared to 2023. However, deadweight prices have risen, reaching record highs of USD 6.36 per kilogram (GBP 5/kg) in mid-Sep-24. Although farmgate prices have increased, consumer prices have remained relatively stable, with a modest 1.7% rise in the average retail price of beef.
The United States Department of Agriculture (USDA) has reversed its decision to restart live cattle imports for slaughter from Mexico, with shipments expected to gradually resume after the New Year and fully resume later. The USDA will allocate USD 165 million to combat the presence of screwworms in Mexico and Central America. Before imports can resume, Mexico must establish USDA-approved livestock collection centers where cattle will be inspected and treated for screwworm before crossing the border. While progress is being made through collaboration between the United States (US) and Mexico, the process will take time due to the multiple necessary steps to fully reinstate trade.
The US is expected to push the UK for tariff-free access to high-quality American meat as part of a trade deal under the incoming US administration. Previous attempts at a deal have failed due to the UK's refusal to accept chlorinated chicken and hormone-fed beef. However, US trade and industry figures now suggest that these issues could be resolved by allowing only meat produced to existing UK standards to enter tariff-free, as the market for such products has grown in the US since Brexit discussions began. The UK government has ruled out any deal that would undermine UK food standards. However, experts believe compromises may be possible given the evolving market for hormone and chemical-free poultry and beef in the US.
While US producers are eager for greater market access, UK farmers are concerned about increased competition and the potential impact on local agriculture. The UK government will need to balance economic growth with the protection of food standards, as the National Farmers' Union warns against imports that would be illegal to produce in the UK. As trade talks progress, ensuring that any deal maintains high food standards will be a key consideration.
In W50, Brazil's wholesale price for boneless rear beef rose 0.78% week-on-week (WoW), reaching USD 4.99/kg. However, the price saw a 4.03% month-on-month (MoM) decline and a 5.72% YoY drop. When measured in Brazilian real, the price remained stable at BRL 30/kg for the fifth consecutive week, suggesting that exchange rate changes mainly drove USD fluctuations. According to Safras and Mercado, the beef wholesale market shows firm prices, with replenishment being a key factor, as retailers have already stocked up for holiday demand. Despite the current firmness, a potential price drop may occur in the second half of Dec-24, as retail schedules are already set, and Brazilian consumers may shift to lower-cost proteins like chicken, pork, and eggs.
In W50, Australia's National Young Cattle Indicator averaged USD 2.25/kg, reflecting a 1.74% WoW increase, a 3.88% MoM rise, and a 17.55% YoY gain. According to Meat and Livestock Australia (MLA), the cattle market showed a positive trend, except for the Heavy Steer Indicator. Restockers were the dominant force, driving prices higher. Yarding increased by 3.96 thousand heads to reach 69.73 thousand heads. At Wagga Wagga, heavier restocker demand pushed prices up as producers sought to replenish their stock. At Dalby, a larger proportion of the cattle offered were cows and heifers, with heifers sold to lot feeders.
In W50, the US's price of lean beef (92% to 94%) averaged USD 7.47/kg, marking a 1.23% WoW decline and the 14th consecutive week of price drops, reaching its lowest level since W12. This also represents a 3.89% MoM decrease. Despite the recent drop, prices remain 23.06% YoY higher, driven by a tightening domestic supply due to a shrinking cow herd. The price decline follows the typical seasonal dip in winter demand after peak summer consumption. However, the ongoing limited production keeps lean beef prices relatively high overall.
In W50, Argentina's average steer beef price dropped to USD 2.21/kg, reflecting a 1.71% WoW decline but a 5.13% MoM rise and a 9.53% YoY increase. This marks the first drop after four consecutive weeks of price hikes. Despite the WoW drop, the market shows an uptick in demand, with significant price increases observed for young bulls, females, and steers, reaching historic highs across several categories. Market trends indicate a seasonal decrease in supply, with calves sold for rearing and fattening between January and May becoming available from June and July, and volumes declining by November. Experts predict prices will remain stable until Feb-25, when new wintering lots are expected to enter the market. However, unique demand-side factors this year have prevented further price hikes from being fully realized.
To address the divergence in EU member state views on stricter animal transport regulations, the EU should consider establishing a unified framework that balances national concerns with the overarching goal of improving animal welfare. This could include a phased approach where more stringent regulations are gradually introduced, allowing countries like Spain and Romania to adjust to the new rules while prioritizing technical innovations, as suggested by Finland. Additionally, incentivizing the adoption of best practices in animal transport and creating an EU-wide certification program for animal welfare could help mitigate economic impacts in regions reliant on cross-border trade, especially in countries like Spain and Romania. It is essential that the European Commission (EC) facilitates dialogue and compromise among member states to create a balanced and forward-thinking regulatory environment.
To maximize the benefits of the new Mercosur-EU beef trade agreement, stakeholders in Mercosur countries should focus on optimizing the utilization of the quota by ensuring high-quality beef exports. Additionally, negotiations should continue to focus on adjusting quotas and tariffs to accommodate growing consumer demand for premium, sustainable beef. To mitigate potential opposition from countries like France, targeted lobbying efforts can further emphasize the long-term economic benefits and the potential to enhance EU-Mercosur trade relations.
Brazil should prioritize the rapid implementation of its National Plan for Individual Identification of Cattle and Buffaloes, ensuring seamless integration with international traceability systems. The government must establish a robust digital infrastructure to monitor animal movements and health, which will enhance the country's appeal in global markets, particularly in regions requiring high sanitary standards for livestock imports. Brazil should also leverage this system to collaborate with international veterinary authorities and export partners, showcasing its commitment to quality and sustainability. Through this, Brazil can strengthen its position as a leading exporter while gaining access to new high-value markets.
Given the declining cattle population in the UK, the government and industry stakeholders must focus on policies that incentivize herd growth and sustainability. Financial support for farmers, such as subsidies or tax breaks, could encourage the retention of breeding cattle, particularly in the beef sector. Additionally, the UK should explore innovative breeding techniques and improve cattle welfare standards to increase productivity.
To address rising prices, retailers and processors could collaborate with the government to stabilize consumer prices while ensuring fair compensation for farmers. Long-term, a national strategy that combines both beef production support and consumer price stabilization will be essential to securing the UK beef industry's future.
Sources: Tridge, Agricultura, Agromeat, Bilaterals, Eltelegrafo, Euro Meat, Farmer.pl, Nieuwe Oogst
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