1. What is the effect of Brazil's tainted-meat scandal on the demand for U.S. meat? What is the effect on the equilibrium price of U.S. meat?
2. Why do governments inspect meat as opposed to individual consumers themselves inspecting meat?
3. Brazil's agriculture minister, Blairo Maggi, said on Thursday that the country's meatpackers shouldn't be blamed for the conduct of a few inspection agents. "People overreacted to the information," he said. "The investigation is about the conduct of a few people and is not a product-quality matter." Should consumer distinguish whether meat was found to be tainted or inspectors were tainted in deciding whether to eat Brazilian meat?
Brazil Meat Scandal Creates Opening for Competitors
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Brazil's tainted meat scandal is driving up cattle prices and creating an opening for competitors in the U.S. and elsewhere that struggled to match the South American nation's low production costs. The European Union and countries including China have banned imports from Brazil or companies there accused by police of bribing sanitary officials for health certificates. The U.S. and other countries have also stepped up inspections of Brazilian imports.
The clampdown on the world's largest beef and poultry exporter pushed U.S. cattle futures to a 14-month high on Wednesday. Tight supply is pushing up prices in Australia, too, and some analysts expect chicken prices to rise in China.
"The fact that there is going to be more demand for any non-Brazilian meat in the coming months is going to be positive for any supplier globally," said Aurelia Britsch, head of commodities research at BMI Research in Singapore.
In the U.S., hog farmers could benefit more immediately from Brazil's troubles than their cattle- and chickenfarming peers because they have more access to the Chinese market. U.S. poultry has been banned from China since an Avian flu outbreak in Jan. 2015. Beef remains locked out of the market until officials finish negotiating the end to a 13-year ban.
Guo Lijun, chief financial officer at WH Group, the world's largest pork processor, said the company hoped to use the ban to boost its operations in the U.S., China and Hong Kong. U.S. hog futures surged on Thursday. U.S. beef and poultry farmers do still have access to the semiautonomous financial hub of Hong Kong. Supermarket chain ParknShop has pulled Brazilian beef from its shelves there. A spokeswoman said ParknShop wants to "increase the supply of meat and poultry products from other regions like Japan, Australia, New Zealand, United States and Europe."
The extent of the boon for meat-producing nations will depend on how long the scandal in Brazil lasts, industry analysts say.
Brazil's Agriculture Minister Blairo Maggi said on Thursday that the country's meatpackers shouldn't be blamed for the conduct of a few inspection agents. "People overreacted to the information," he said. "The investigation is about the conduct of a few people, and is not a product-quality matter."
Already South Korea earlier in the week lifted its ban on Brazilian products because none of the companies named in the sting exported to the country.
And it will be difficult for one country to cut too deeply into Brazil's market dominance, said analyst Steve Wagner of CHS Hedging. Short-term beef supplies in many countries are already tight. "You would have to have product pretty close to shipment," he said. "It's just not practical."
Yet in Australia, ranchers hope Brazil's misfortune might allow them to re-emerge as the world's largest beef exporter--a title the country lost to Brazil last year.
"Anyone short of beef is naturally going to ring Australia," said Richard Norton, managing director at farm body Meat and Livestock Australia. "It really is an opportunity."
Write to Lucy Craymer at
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March 24, 2017 05:30 ET (09:30 GMT)
Subject: Beef; Farmers; Scandals; Poultry;
Location: New Zealand United States--US Singapore Australia China Hong Kong Brazil Japan Europe South Korea
Company / organization: Name: European Union; NAICS: 926110, 928120;
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