(Bloomberg Opinion) -- For a sign of how much the coronavirus is upending economies across the globe, try this for size: Even Brazilians are finding it hard to afford their daily ration of beef.
With 1.1 million people sick from Covid-19 compounding the problems of an economy that’s seen unemployment in double digits for four years, consumption of beef is likely to fall 10% this year, Fabiana Batista and Tatiana Freitas of Bloomberg News reported this week.
That could be a disturbing sign of how a country once seen as a winner of the last era of globalization is falling behind. On the other hand, it might be a promising indicator that a feared boom in the global cattle industry — which already accounts for more emissions than the world’s car fleet — isn’t about to wreck the planet.
As we’ve argued, it’s not impossible that we’re already approaching peak beef. Consumption growth over the past decade has fallen to the lowest levels since the mad cow disease era of the 1990s, and in many countries that traditionally revere red meat such as the U.S., Australia and Argentina, it’s actually in decline.
The reasons aren’t hard to discern. Quite apart from health issues, beef production requires an unusual amount of land, feed and water — one reason that it’s by far the most expensive regularly consumed form of meat. About half the world’s 5 billion hectares of agricultural land is already used to graze and feed cattle (and, to far a lesser extent, sheep). That means there’s limited remaining capacity on the planet to raise more beef — one reason that consumption has grown so much more slowly in recent decades than for smaller, faster-growing livestock, such as pigs and chickens.
While coronavirus is clearly taking its toll in Brazil, that long-term trend is the best explanation for what’s happening at the moment. Brazil’s beef prices have been rising faster than the rate of inflation for decades in local-currency terms, as rising incomes and an increasing appetite for red meat in Asia have reoriented the industry around exports rather than domestic supply.
The shift is likely to be particularly acute at present. Thanks to the devastation wreaked by African swine fever to China’s pig herd last year, the country’s diners are in the market for alternative sources of protein. On top of that, per-capita gross domestic product, which was less than half of Brazil’s a decade ago, has now pulled into the lead.
In a world where a finite supply of beef will be bought by those most able to afford it, China’s 1.4 billion diners on average now each have more money to spend on red meat than Brazil’s 210 million. That effect is likely to play out elsewhere: Other Latin American beef exporters, such as Mexico and Paraguay, have also slipped behind China in terms of incomes in recent years, and Argentina may be next.
That narrative may be felt as a loss of prestige and wealth in a part of the world that built its fortunes on ranching, but in truth it’s a normal trend in commodity markets. Botswana is far better off exporting its diamonds to the world — and using the proceeds to give its citizens some of the best living standards in sub-Saharan Africa — than if it insisted its rocks could only be consumed at home. If Brazil’s government doesn't distribute the proceeds of its rising farm exports equitably, that’s the fault of the government, not the exports.
In terms of the global climate, the shift in the geography of meat is also an encouraging sign that price signals matter. The worst-case scenario for the planet would see appetites for beef prove so powerful and universal that we end up devastating yet more of our environment in an insatiable drive for the taste of a Big Mac.
In truth, though, beef consumption has been growing more slowly than incomes for decades now. Land under pasture is actually shrinking on a global basis and in 2016 hit its lowest level since the 1970s. The limited increase in beef supply that we’re seeing is coming not so much from clearing more land for raising cattle on grass, but from intensification of the existing industry through dairying and use of feedlots.
People (especially in rich countries, where consumption is highest) should still make efforts to sharply reduce their intake of red meat, both for their own health and that of the planet. Still, the meats that are gaining market share on a global scale — pork and chicken — are those with the lowest cost and carbon footprint. We’re not about to eat ourselves out of house and home just yet.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.
©2020 Bloomberg L.P.
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