Brazilian beef exporters cut prices as weaker real emboldens China

Brazilian beef packers have lowered export offers, particularly for front forequarter 8 cuts, or FFQ-8-8, destined for China, after the Brazilian real depreciated against the US dollar following the reelection of President Luiz Inacio Lula da Silva Oct. 25.

The real's weakness has created a dual pressure on Brazilian exporters: while a cheaper currency improves the competitiveness of Brazilian beef in dollar terms, it has simultaneously emboldened Chinese buyers to demand steeper price concessions, squeezing margins for packers already contending with historically high domestic cattle costs, market participants said during the week ended Oct. 30.

During the week, Brazilian offers for forward FFQ-8 shipments in China were reported at $6,800-$7,300/mt CFR, while Chinese bids were heard at $6,500-$6,700/mt CFR, with all indications for January arrival. Offers were generally lower during the week than the $7,300-$7,500/mt CFR offers reported by market participants the previous week.

According to market participants, the Chinese market had anticipated a decline in Brazilian prices following the election outcome and was moving aggressively to lock in more favorable terms ahead of the China International Import Expo, or CIIE, scheduled for Nov. 5-10 in Shanghai.

"With the elections and the impact on the exchange rate, prices have fallen, while Chinese buyers have become more aggressive in trying to pass the currency impact back to exporters," a Brazil-based beef packer said.

The Brazilian real was valued at 5.44 reais per dollar at 5:30 pm Brasília time on Oct. 30, in the Platts Market on Close assessment process.