Beef cattle industry

Brazil has the world’s largest herd of commercial cattle with about 180 million head. Cattle raising was introduced by the Portuguese in the beginning of the 16^th century and soon became one of the leading economic activities in the country. At the beginning of the 20^th century, a few Brazilian cattle raisers imported animals of the Nelore breed from India. Thanks to its adaptability to the country’s tropical climate, the breed dominated the beef industry and continues to be the leading beef cattle breed throughout Brazil.

Source: USDA
(1) Estimated.
(2) Non traded cattle.

The tropical climate, with its abundant sunshine and rainfall, is ideal for cultivation and hence Brazil has abundant natural pasture and the conditions for growing pasture. Brazil thus employs extensive cattle raising, that is, cattle are allowed freely to pastures, eating only grass, with mineral salt supplements and occasionally complements such as protein or energetic salt, to accelerate growth.

The Brazilian cattle raising industry has undergone a process of modernization in the past 10 years. Scientific and technological development in the areas of reproduction, nutrition, genetics, health and animal husbandry, the modernization of farm activities through research and the growth of the machine and tools industry has helped Brazil become one of the world’s most respected agribusiness markets. Animal and vegetable health surveillance programs to ensure production of healthy food have also contributed to this transformation.

Cattle in Brazil are fed on pasture, which is abundant throughout the year.

Since 1996, the use of animal protein in cattle feed is banned. The use of growth-inducing substances is also prohibited.

Brazil has one of the most complete animal health campaigns, and is considered by the World Organization for Animal Health (OIE) as a “low risk area” for "mad cow” disease (BSE - Bovine Spongiform Encephalopathy).

Time line of cattle raising in Brazil – milestones:

• 1910s – The First World War and food scarcity in Europe (PARDI, 2006).
• 1920s – First steps towards the Federal Inspection Services (SIF): foreigners require that products of animal origin are subject to health inspection (PARDI, 2006).
• 1930s– Brazilian carcass exports of around 97,000 tonnes equivalent (PARDI, 2006).
• 1940s– Brazilians go to India in search of bovine genetics.
• 1950s– RIISPOA: Regulation for Industrial and Sanitary Inspection of Animal Origin Products. Law 1283 of December 18, 1950.
• 1960s– Phosphorus deficiency seriously affects the productivity of domestic cattle herd (FABIANI, 1961).
• 1970s – Introduction of Brachiaria species grass: Introduced in the cerrado region in the Midwest of Brazil in the beginning of 1970s, Brachiaria grass quickly expanded and caused a great impact on pasture capacity.
      - Federalization of Industrial and Sanitary Inspection of Animal Origin Products. Meat Inspection. Standardization of techniques, installations and equipment. Bovines I. Slaughter House, cattle pens and annexes. Process led by inspector José Christovan Santos (PARDI, 2006).
• 1980s– As a tropical country, Brazil does not have the advanced animal production technology and efficient service structure as in developed countries. The weaning rate is around 49.6%, slaughter rate is 12.2% and average weight of carcasses is 200kg (Corrêa, 1989).
• In only two decades (1990 and 2000), Brazil has become the world’s second largest meat producer, with 9 million tons of carcass weight equivalent and the world’s largest exporter, with projected exports of 2.4 million tons of carcass weight equivalent for 2007, according to data from the Ministry of Development, Industry and Foreign Trade (SECEX/MDIC). According to USDA data, Brazil has access to just 43% of the global beef market – Russia (17%), EU 25 (11%), Egypt (4%), Philippines (3%), Taiwan (2%), Hong Kong (2%), Others (5%). The new markets, that is the world’s wealthy regions, which follow the US sanitary protocol, do not accept the Brazilian foot-and-mouth disease control and eradication zoning, are - US (29%), Japan (14%), Mexico (7%), South Korea (4%) and Canada (3%).

Extensive cattle raising and the high productivity of farms combined with the low costs of land and labor, make Brazilian beef cattle one of the cheapest in the world, and consequently, Brazilian beef is one of the most competitive in the world market. As a result, Brazil is the world’s largest beef exporter in terms of volume and revenue, exporting to more than 180 markets.

Economic Cycle of Beef Cattle Industry

The Brazilian cattle industry has a 3 to 5-year economic cycle, beginning with a period of abundance of cows, high production of calves and, consequently, beef. The high availability of calves reduces their price and, as a result, it becomes better economic sense to slaughter cows instead of raising more calves. With the increased slaughtering of cows, the number of calves drops, their price increases, making it feasible to retain cows for reproduction.

Cow slaughtering was intense back in 1996 and 1997. Consequently, in the next five years calf supply decreased, beef production was low, and cows were retained to rebuild herds. As of 2003, the beginning of the cycle repeated, due to the new growth in cow slaughtering, estimated to have lasted until the end of last year. Beef production thus remained low during the year.

At the end of 2007, the arroba value was affected by cyclical pressures, the growth in GDP which boosted domestic demand, and commodity price hikes, resulting in a sharp increase in cattle prices.

As is customary in the abovementioned cycles, the retention of cows began at the end of 2007 and should continue to grow, resulting in a gradual increase in beef production till 2010. Hence, further hikes in cattle price are expected.

Since we are in that phase of the cycle when cattle supply is low, the arroba price tends to increase. This generates more revenue for cattle raisers, who may invest it to resume production growth.

Table of Production Prices

Brazilian cattle produce lower-fat beef that is better suited to the tastes of modern consumers. Slaughtering of animals with average age of 22 months guarantees tender and juicy beef in a standardized manner. All the beef exported is produced in areas free of the foot-and-mouth disease (FMD). Today, 1 out of every 3 kilos of beef sold worldwide comes from Brazil. Brazilian beef is exported to the most demanding countries in terms of quality, safety, product origin, animal well-being, and socio-environmental aspects.

Health Surveillance and Quality Control

During the 90s, Brazil significantly improved the health control systems for herds, especially with regard to FMD. In 2007, 95% of the Brazilian herd is expected to be in FMD-free areas as a result of more vaccination programs. The following maps show the Brazilian states considered FMD-free in February 2007, and show the evolution compared to 1998 data.

Most of the Brazilian cattle may be tracked, which allows the identification of its origin more easily. Tracking was implemented by the Brazilian government through the Brazilian Bovine and Bubaline Identification and Certification System (SISBOV), which specifies the public and private companies that are responsible for monitoring and certifying (including the criteria) the origin of imported and domestic beef products. All exported beef comes from tracked cattle. In addition, the Brazilian government currently oversees the world’s largest FMD vaccination program in which both domestic cattle and cattle in neighboring countries are vaccinated against the FMD.

Bovine Spongiform Encephalopathy (BSE)

Beef consumption is, and will continue to be, influenced by food safety concerns. The first BSE crisis (commonly known as Mad Cow Disease) began in March 1996, when the British government announced a connection between BSE and the Creutzfeldt-Jakob disease, which affects humans. This discovery caused an immediate reduction in worldwide beef consumption. Several measures were taken to control the spread of BSE among cattle and to minimize the risk of human exposure. These included the Over Thirty Months Scheme (a plan for slaughtering cattle aged over 30 months), which involved the purchase and wipeout of all cattle over 30 months in the United Kingdom, the Calf Processing Aid Scheme, which involved the wipeout of European Union’s calves aged below 20 days, the Selective Cull scheme, which required the elimination of cattle with a higher risk of contracting BSE, the identification plans and the possibility of tracking cattle. BSE affects cattle fed with animal feed. Brazil is considered a BSE-free country and less vulnerable to the disease due to the practice of extensive cattle farming and laws banning usage of animal feed.

Food-and-Mouth Disease (FMD)

FMD is a contagious disease caused by a virus and affects cattle, pigs, and buffalos, among others. Human contamination resulting from consumption of beef and by-products has not been proven; neither has the transmission among human beings.

The importance of FMD regarding public health would be insignificant if the economic and social impacts of its damage to the population, productivity and livestock profitability were not taken into consideration. The disease reduces product availability inside the country and for exports, in view of embargoes from importing countries.