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Attractiveness of cattle farming in Brazil

Brazilian beef exports (in natura) hit a record in 2019. This scenario, along with high dollar rates, resulted in a record revenue in Brazilian currency. The higher competitiveness, which is related to lower production costs compared to competitors, is one of the factors that favored the Brazilian activity to meet the high international demand. Moreover, the supply decrease in global terms, with consequent higher values, also favored sales from Brazil throughout 2019.

 

COSTS – Data presented at the last Agribenchmark Beef Conference (an annual event that gathers researchers to compare and discuss zootechnical and economic data regarding cattle farming from several countries), in 2018, in Africa, show that the cattle farming in Brazil stands out in the global comparison, because it presents one of the lowest costs to produce one kilo of beef.

 

When calf production costs are considered, the most competitive countries are Ukraine, Argentina, Uruguay, Brazil, Colombia, Paraguay, Australia and South Africa. It is important to mention that the majority of countries with low costs are in the South America, which have pastures.

 

Ukraine registers the lowest calf production costs in the world because of its high soil quality, which favors productivity. According to data presented in the conference, total costs to produce a calf in Ukraine is roughly 100 USD per 100 kilo of live carcass and, in Brazil, it is 200 USD per 100 kg of live carcass. The Brazilian activity is heterogeneous, and, therefore, some farms present costs close to 100 USD/100 kg, while others register costs above 200 USD – based on data from 2018.

 

Farms with higher calf production costs are mainly located in Europe, because of the subsidy policy.

 

Concerning the finishing, countries that have the lowest costs in the backgrounding/finishing system are Ukraine, Argentina, Brazil, Colombia, Paraguay, South Africa and Namibia. Again, countries in the South America are the most competitive.

 

In Ukraine, finishing costs were calculated in 2018 below 200 USD per 100 kilos of carcass sold. In Brazil, costs vary from slightly more than 200 USD to a little less than 100 USD per 100 kilos of carcass sold. This wide gap is explained by the system adopted, from pastures to feedlot.

 

Higher costs, in turn, are again observed in European countries, which demand subsidies for production – in many cases in Europe, market prices do not pay production costs.

 

In Brazil, many producers are already focusing on ways to increase productivity, which is much lower than the potential. For instance, the United States have 89 million animals and the average productivity is approximately 133 kilos of meat per animal, but with costs that vary from 356.00 to 407.00 USD/100 kg. Brazil, in turn, has 200 million animals, average productivity of 45 kilos per animal per year, but at lower costs. The growth potential in Brazil is an alternative to reduce costs and continue as an important player in the international scenario.

 

GLOBAL SUPPLY

Brazil alone accounts for circa 15% of the world beef production. Brazil, the US and China represent almost 46% of the global meat production together.

 

The United States is a leader country in production and a major exporter; however, it is also a big importer. China, in turn, is a great producer; however, it faces a restrain in the production area and health problems, such as African Swine Fever (ASF) cases, forcing the country to look for alternatives to purchase.

 

Other traditional meat producing countries have challenges related to area (such as Uruguay and Paraguay), political aspects (Argentina), high feeding costs (European countries and Canada) and weather problems (Australia).

 

Australia faced severe bushfires, which may reinforce the supply decrease of meat – it is important to mention that the country had been an important meat supplier to China. India, in turn, in spite of its big herd, faces difficulties related to health and productivity, along with the religious issue.

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