Is China fed up with beef?
The state intervention in the meat market in China (the opening of Hong Kong for the entry of meat through the gray channel, not granting more credits to state companies so that private companies buy the product and dump pork and beef from public reserves) had a dramatic impact in the first week of the year.
The Uruguayan meat broker based in China and director of the Casti Trading company, Daniel Castiglioni, told Rurales El País that “there is an abrupt fall in beef prices, up to $ 1,500 per ton, from a month ago to the date. It's something historical, there was never a drop of that level. There are importing companies that have lost a lot of money. Today they ask us to help them with the contracts that are bought expensive, that is the main concern of Asian buyers, they want to get the best possible stop".
The new scenario created a wave of bankruptcies among beef importers, even for the ones with years of experience. Castiglioni estimated that "after the Chinese new year, prices could stabilize. However, business began to take place at very low values,", he added.
The new prices in the Chinese beef market are sending waves of panic across the ocean in three major exporting markets: Brazil, Uruguay and Argentina. Trading platform "Beef to China" is reporting that "Brazilian cattle price has fallen sharply, as the purchasing enthusiasm, especially from China weakened. Seeing from the trends of cattle price in early 2020, the previous industry's prediction that it would not fall below 200 BRL ($49.20)/15kg no longer holds water. From local time on December 27, 2019, to later one and a half months, the average carcass price of live cattle in Sao Paulo, Brazil, for the first time fell below 200 BRL /15kg, and since that, it keeps stable and below this level.
Uruguay's cattle price is generally in line with Brazil's, that is, since mid-November 2019, it began to decline and then remained stable over the New Year.
Compared with Brazil and Uruguay, live cattle prices in Argentina appeared differently. The average carcass price of live steers didn’t stop rising all the way up until the end of 2019 when it slowed down slightly and then fell back in early 2020; while overall, the average carcass price of live cows began to fall in late November 2019 and kept going down till the beginning of 2020". However, a decrease in prices for Argentinian beef is also directly related to the devaluation of Argentinian peso. At the end of August, the President of the Argentinian Chamber of Meat Industry and Commerce (CICCRA), Miguel Schiariti, warned that the industry dependence on one single export market is too high. "What happens if the Chinese market is getting cold? It would cause us deep damage. We are too focused on one country", he said, adding that opening new markets in Southeast Asia such as Korea, Taiwan or Vietnam would be recommended.
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