Slowdown in demand for beef hits Brazilian suppliers

China’s beef imports are dwindling amid slowing consumption and ample domestic supply, dealing a blow to its biggest supplier, Brazil. Official data shows the value of China beef imports fell last year for the first time since at least 2016, with prices plunging to the lowest level in almost three years. Import volumes are expected to fall 4pc this year, ending 12 straight years of meteoric rise, according to the US Department of Agriculture.

The predicament highlights the risks in relying heavily on a single customer: China was the destination for more than 52pc of the South American country’s beef sales last year even after halting imports for roughly two months over a case of Mad Cow Disease. While the nation’s meatpackers have sought to diversify their exports, alternatives remain limited.

“Brazil depends a lot on China – if there’s a hiccup in China, it will affect Brazil very badly,” said XP Investimentos analyst Leonardo Alencar.

The outsized exposure to China has taken a toll on meatpackers’ earnings. Minerva, the largest supplier of South American beef, saw export revenue shrink by almost 18pc in 2023.

Marfrig Global Foods’s South American beef operation saw a decline of nearly 26pc.

The exporters’ shares have been mixed this year. Minerva’s stock has dropped 19pc while Marfrig is up about 10pc. JBS, the world’s largest supplier, is down 6.8pc this year to date.

China’s share in the global meat trade has plunged from a 2020 peak following an increase in domestic meat supplies.

The nation is expected to produce 7.7 million metric tons this year, up 1 million tons from 2020, according to the USDA. An economic slowdown has prompted consumers to seek cheaper proteins.

“Local farmers are giving up cattle breeding and doing a massive slaughtering of heifers,” Fernando Galletti de Queiroz, Minerva’s chief executive officer, said last month in a conference call with analysts. Increased competition from Australia has also pressured the price Chinese importers are willing to pay, JBS CEO Gilberto Tomazoni said during the company’s earnings call.

Yet most analysts predict China’s pullback will be temporary, and that the Asian nation will continue to be a big growth engine for Brazil’s beef exporters as per capital consumption levels still trail the global average.

China may even become more relevant, after the country last month cleared an additional 24 Brazilian beef plants for export.