The South America Cattle Report for January 25, 2017

By Patrick Archer and Ing. Agr. Eduardo Blasina

MONTEVIDEO In this week’s South America Cattle Report, Argentina’s meat exports rose 19% in 2016, Brazil’s brighter beef outlook in a Trump world, Paraguay’s annual slaughter tops 2 million, and Uruguay’s bone-in sheepmeat will enter the U.S. this year.

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Uruguay Cattle Market Prices

The Uruguay fat cattle market is seeing a second straight week of supply/demand balance, although prices moved a bit higher yesterday given a diminished steer supply.

The Cattle Brokers Association (ACG) weekly reference price for steers is currently between US$2.85 and US$2.90 per kilo on-the-hook (cuarta balanza), while the heaviest heifers are fetching between US$2.60 and US$2.65 per kilo. Supply lines at most plants nationwide are running between 7 and 10 days.

Federico Jaso tells FarmsUY co-founder Eduardo Blasina that the current supply situation is pushing heifer prices down and steer prices up, because there are more finished heifers coming to market when the industry is more interested in buying steers. This difference in supply could mark a floor for the machos but not for heifers.

In their weekly report, the ACG also said that even thought there is sustained slaughter activity, we’re unlikely to see a big bump in new sales activity, because of the prices that most meatpackers are floating. The ACG’s reference price for steers is US$2.93 per kilo and US$2.61 a kilo for heifers.

In the mercado ovino, the ACG weekly reference price for sheep is between US$2.70 and US$2.80 per kilo, while the weekly range for lambs is oscillating between US$3.30 and US$3.40 a kilo.

Uruguay Weekly Slaughter Activity

Total weekly cattle slaughter for the week ended January 21 was 44,685 head, or 1% higher than the week prior and 2.2% higher than the same week in 2016.

Although down 2.6% compared to last week, the total number of heifers exceeded 50% of the total for the fifth consecutive week. The 22,895 heifers accounted for 51.7% of the total, and that number is 1.7% below the same week in 2016.

Meanwhile total steer slaughter rose 6.6% last week. The 20,947 steers were almost 11% more than the same week in 2016 and represented 47% of the total weekly slaughter.

Weekly cattle slaughter activity by plant was led by Frigorifico Tacuarembó with 3,840 head followed by San Jacinto with 3,087 animals and PUL with 2,986 head.

Weekly sheep slaughter rose 3.2% to 22,259 animals, or 40% more than the same week last year. Las Piedras was once again the Uruguay plant processing the most sheep (10,923) followed by San Jacinto (6,048) and Somicar (2,035) rounding out the top three.

Uruguay Meat Export Prices

For the week ended January 6, the National Meat Institute (INAC) weekly reference price for Uruguay beef exports fell US$3,457 per ton. The four-week moving average price of Uruguay beef exports is now US$3,404 per ton or 8% lower than the same week in 2016.

For the same week, the National Meat Institute (INAC) weekly reference price for Uruguay sheepmeat exports fell 13% to US$3,893 per ton. The four-week moving average price of Uruguay sheepmeat is now US$4,220 per ton or 5% higher than this time last year. (Blasina & Associates)

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Brazil Beef Benefits With More Protectionist U.S. Policies

Two articles of note today regarding Brazilian beef competitiveness given a more protectionist trade environment in the U.S. under Donald Trump who signed more executive orders regarding immigration and construction of the Mexico border wall on this, his third full day in office.

First, Portos e Navios publishes an article from Gazeta de Povo’s Giuliano Gomes analyzing the improved outlook for Brazilian beef with the U.S. officially exiting TPP.

Gomes writes that Brazilian officials were cheering the news considering that U.S. participation in the agreement would have made Brazilian beef more expensive compared to U.S. beef in key Asian markets like Japan. The same can be said for Brazilian soybeans, orange juice, and sugar among other exports to Asia.

And in terms of U.S./Brazil bilateral trade, officials from both countries will begin meeting next month to work on advancing a common agenda to facilitate trade and investment between the two nations. (Portos e Navios)

In the other competitive Brazilian beef story, Pork World says Brazil is sending 87 companies to this week’s Gulfood in Dubai which is the premier food and drink expo in the Middle East.

The Brazilian Agency for Investments and Export Promotion (Apex-Brasil) which is leading the delegation expects to exceed the US$728 million in new business that Brazilian companies closed at Gulfood 2016. The 2017 event begins tomorrow.

In 2016, Brazil exports to six Middle East countries (Saudi Arabia, UAE, Kuwait, Qatar, Bahrain, and Oman) topped US$6.04 billion compared to imports of only US$2.66 billion. In 2017, Brazil expects to build on the already impressive trade surplus of US$3.38 billion with these countries. (Pork World)

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ABC: Argentina Beef Exports Rose 19% In Volume In 2016

A report out today from the Argentine Consortium of Meat Exporters (ABC) and published in La Nación says that Argentina beef exports rose 19% in volume in 2016 and 4.2% in revenue.

The report says Argentina beef exporters shipped over 237,000 tons last year compared to 2015 when the total was just shy of 200,000 tons. In dollars, the value of those shipments totaled US$1.070 billion or roughly US$46 million more than in 2015, a 4.2% increase. If you factor in the offal exported, the total value was actually US$1.260 billion.

In related ABC news, the president of the association, Mario Ravettonio, applauded the decision by the federal government to increase tax reimbursements for meat exports. “The measure gets our support, because it helps foster more competitiveness,” Reavettonio told Radio Splendid. (La Nación Campo)

InfoRegión offers a more detailed explanation of the new reimbursement plan which fell to zero under the Kirchner administration but has been raised to 4% under the Macri administration. The new regime will add another 1.8% for beef exports and 1% for poultry. (InfoRegión)

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Paraguay Beef Exports The Most Expensive In the Region

A new report this week from Valor Carne says that Paraguay cattle prices remain very high due to strong demand and limited supply caused by the recent kosher slaughter and meat exports to Israel.

“As a result, Paraguay beef, approved for export to the European Union, remains the most expensive in the region. The values in Paraguay are in the US$3.20 per kilo range on-the-hook, while Argentine steers are selling for US$3.14 per kilo on average, Brazilian steers are fetching US$3.11 per kilo, and Uruguay steers are going for US$3.07 per kilo on-the-hook,” says the article in La Nación.

“In Argentina we have seen a new drop in average cattle prices in relation to the rest of the region. The exchange rate fluctuations and industry resistance have exerted downward pressure on prices, while Paraguay cattle remain the most expensive in the region despite the recent upticks in both Brazil and Uruguay.”

According to Paraguay’s National Service of Quality and Animal Heath (SENACSA), the national meatpackers slaughtered over 2 million cattle last year...2,003,369 to be exact. That total represents a 6% increase over 2015 total slaughter in Paraguay. Similarly, Paraguay meat exports rose from 237,655 tons in 2015 to 240,284 tons in 2016. (La Nación)

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Uruguay Bone-In Sheepmeat Will Enter the U.S. This Year

And finally, a follow-up to last week’s feature story for Uruguay from FarmsUY co-founder Eduardo Blasina and the president of the Uruguay Wool Secretariat (SUL).

Uruguay Ambassador Carlos Gianelli says he believes bone-in sheepmeat will enter the U.S. this year, because U.S. production is not sufficient to meet local demand, and the volume that Uruguay can ship does not represent a threat to the U.S., compared to a country like Australia.

According to figures from Trademap, the U.S. imports 32% of its sheepmeat from Australia, 12% from New Zealand and 8% from Canada. In contrast, Latin American countries only account for a very small percentage of the total including Nicaragua (2%), Chile (0.2%) and Mexico (0.1%).

For Uruguay sheepmeat producers and exporters, the value of gaining access to the U.S. with bone-in sheepmeat (boneless is already approved) has less to do with volume and much more to do with diversification and the much higher value per shipment of bone-in product to one of the world’s most demanding markets.

Currently, the bulk of Uruguay sheepmeat exports go to Brazil (58%), China (24.7%), the Netherlands (3.8%) and Hong Kong (2.6%).

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