Meat Giants From Brazil Are Ready to Cover American Shortfalls
Brazil Has Meat Supply Ready to Go to Cover U.S. Shortfall
(Bloomberg) -- Brazil’s JBS SA, the world’s biggest meat company, has a message for U.S. carnivores: We’ve got you covered.
Amid a rash of slaughterhouse shutdowns in the U.S. related to the coronavirus pandemic, the chief financial officer of JBS said his company can scale up exports from Australia and has idle capacity in Brazil for beef shipments to the U.S.
“Our geographic diversification has been a natural hedge for trade barriers and sanitary issues,” CFO Guilherme Cavalcanti said in a webinar sponsored by Genial Investimentos. “Now, this flexibility has worked as a supply hedge for the current crisis.”
Minerva SA, the largest South American beef exporter, also is ready to meet U.S. needs from eight plants in Brazil, Argentina and Uruguay, according to the CFO Edison Ticle. The company’s sales to the U.S. have been rising since early April, when the outlook for meat supplies in the nation started to deteriorate, he said.
“The U.S. has become an important client,” Ticle said in an interview.
On Monday, the CEO of Marfrig Global Foods SA, another Brazilian meat giant, said U.S. demand for South American beef has intensified amid plant closures due to the coronavirus outbreak. Marfrig is also allowed to ship beef to the U.S. from the three South American countries.
The U.S. reopened the market for Brazil’s fresh beef in February after suspending purchases in 2017 on safety concerns. With the reopening, Brazil is allowed to export to the U.S. around 60,000 metric tons a year in a tariff-free import quota shared with other nations, according to Ticle. Shipments exceeding the quota should pay a 26% tariff, which may still be profitable considering the current price differentials, Ticle said. Argentina and Uruguay have their own quota in the U.S. beef market.
On Tuesday, U.S. President Donald Trump entered the food fray. He plans to use a federal act to order companies to stay open as critical infrastructure, and the government will provide additional protective gear for employees as well as guidance. At least 22 meat plants have closed within the past two months, reducing pork-processing capacity by 25% and beef by 10%, a food-worker union says.
JBS, based in Sao Paulo, operates in 15 countries. A beef unit and a pork subsidiary in the U.S. have shut because of the virus. Beef inventories in the U.S. are sufficient only to supply 15 days of consumption, Cavalcanti said.
JBS also produces poultry. “We are well positioned” to handle any shift in demand for pork, beef or chicken, Cavalcanti said.
For Brazilian meat companies, the rally prompted by the African swine fever seems to be back. JBS shares have jumped 18% this month, while Marfrig stocks jumped 42% and Minerva shares soared 50%.
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