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ABARE Outlook 2007. Prospects for South American beef in the Pacific Markets Dr. Roberto Vázquez Platero. Background.

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ABARE Outlook 2007

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ABARE Outlook 2007

Prospects for South American beef in the Pacific Markets

Dr. Roberto Vázquez Platero


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Background

  • Ten years ago South American countries had a limited participation in world markets. Argentina had lost the leading position it held until the 70’s and Europe, Australia, New Zealand and the USA were the dominating players.

  • Since the mid nineties this situation began to change: with a clear leadership from Brazil, South American countries became major actors in beef trade

  • The objective of today’s presentation is to have a look at their growth prospects and most important for Australia, what are their prospects to compete in premium Pacific markets in the near future?


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World exports 1995


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World exports 2006


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Contents

  • Basic information about South American (SA-5) beef industry

  • Determinants of beef production and exports growth

  • Will the growth pattern continue in the years ahead?

  • What are the prospects for South American beef access in Pacific markets?


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South America-5: 12,6 million sq kmts with abundant agricultural resources


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SA-5 Beef Statistics 2006


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Average steer price in selected countries 2006(usd per kilo liveweight)


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Brazil Production (000 tons cwe)


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Brazil exports (000 tons cwe)


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Brazil: major export destinations of chilled and frozen beef 2006


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Brazil’s Determinants of growth

  • Economic stability and devaluation

  • Availability of large areas to expand agricultural frontier toward the north and west of the country

  • Technology generation for tropical areas

  • Public incentives

  • Market opportunities


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Brazil’s prospects

  • There are significant threats as well as opportunities for beef production, nevertheless, frontier expansion and production growth are expected to continue

  • Official estimates assume that production will increase to 13 million tons in ten years

  • However, consumption will also increase and exports are expected to grow at a lower rate to 2,9 million tons in a decade

  • Improved market access derived from better sanitary conditions could result in much higher export increases


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Argentina Production (000 tons cwe)


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Argentina exports (000 tons cwe)


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Argentina: major export destinations of chilled and frozen beef 2006


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Argentina’s prospects

  • Outstanding capacity to increase grass and grain fed high quality production

  • Conservative estimates suggest an export potential of 2 to 2,5 million tons cwe

  • Needs to access high value markets, NAFTA first and Pacific premium markets thereafter

  • Public policies anti export bias needs to be removed

  • If so, will be a first class actor in world markets in the future


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Uruguay Production(000 tons cwe)


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Uruguay exports (000 tons cwe)


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Uruguay: major export destinations of beef 2005


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Uruguay: major export destinations of beef 2006


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Uruguay: major export destinations of beef 2007


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Uruguay’s prospects

  • Uruguay’s beef has access to all three NAFTA markets and will likely be the first large exporter to compete in Japan and Korea

  • Led by good economic returns and growing investment in the productive sector, exports will increase to 750 thousand tons by the end of the decade

  • Creating more value for the supply chain requires focusing on meat quality and taking advantage of natural production systems

  • Increases in grain finishing and expansion of “natural and organic” production, USDA process verified, branded and targeted to supply the “better for me/ better for the world” segments of developed country markets are expected


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Paraguay exports (tons cwe)


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Chile’s prospects

  • Major markets: México, EU, Cuba, Japan

  • Limited production capacity

  • Outstanding access conditions

  • Sanitary condition comparable to AU and NZ

  • Tariff access even better, due to FTA’s with major beef importing countries, including USA, Canada, Mexico, Korea and Japan


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Sanitary status and OIE recognition

  • None of the SA-5 countries have trade restrictions due to BSE; Argentina and Uruguay are free of BSE according to OIE

  • In relation to FMD, OIE recognizes:

  • Chile: country free without vaccination

  • Paraguay and Uruguay: country free with vaccination

  • Argentina: limited free zone without vaccination has applied for country free with vaccination in 2006

  • Brazil: limited free zones with vaccination

  • However, only Chile has access to premium Pacific Markets


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Is there a case to negotiate access ?

  • Yes, there is, under international accepted standards for countries or zones free with vaccination (Uruguay, Paraguay and eventually Argentina)

  • The SPS Agreement encourages WTO Members to base their sanitary measureson international standards, guidelines and recommendations, where they exist.

  • Members may choose to adopt a higher level of protection than that provided by international texts if there is a scientific justification or if the level of protection provided by the relevant international texts is considered to be inappropriate. In such circumstances, Members are subject to obligations relating to risk assessment and to a consistent approach of risk management.


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Facts about risk of importing beef from countries that vaccinate against FMD

  • OIE supports the importation of fresh meat from FMD free countries where vaccination is practised under certain conditions

  • USA, EU, Canada and other countries import meat from FMD free countries with vaccination, after the corresponding risk analysis

  • The import ban of Pacific markets such as Japan and South Korea, to South American beef, is not based on scientific risk analysis, is not compliant with OIE standards and is not consistent with the WTO SPS agreement that calls the “Assessment of Risk for the Determination of the Appropriate Level of Sanitary or Phytosanitary Protection”


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Individual country strategies to access Pacific markets

  • Uruguay: is already requesting access through the corresponding risk analysis. As a small country it is unlikely that it will bring the case to OIE and WTO arbitration

  • Argentina and Brazil: Will wait to get access to the US market since USDA standards are a world reference. Once this objective is attained, we should expect strong pressure from both countries to have access to Japan and South Korea


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Final remark

  • South American countries will continue to increase beef production and exports

  • More than 50% of world exports will come from these countries in the near future

  • All countries are looking to the Pacific markets as a major opportunity to stimulate further growth

  • We will see much more pressure to gain access in the near future

  • Australia, NZ and USA, will very likely be facing more South American competition in Pacific markets in the near future


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THANK YOU


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