World Beef Report Issue 1225
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World Beef Report Issue 1225 Published in World Beef Report (/site/index.php/en/editions) Tuesday, 18 July 2017 00:00 Date: Wednesday, July 19th, 2017/Editor: Rafael Tardáguila China buys but resists accepting higher prices asked by the region Stronger Real curbs business with Russia Weaker dollar and post-season pushes Mercosur steer price up Chinese Group buys 50% of Uruguayan packer Lorsinal Argentina improves Hilton performance but loses sales for 6,800 tons Paraguayan beef exports in June at 20-month top US says no timetable to reopen market for Brazil (/site/index.php/en/component/banners/click/35) FOB Mercosur China buys, but resists higher prices asked by regional exporters For the Mercosur region countries, the international beef market goes through a situation of uncertainties and tensions in some destinations to accept higher prices. Both Uruguay and Argentina try to transfer higher cattle prices to exports but that seems to find a firm opposition from importers. In fact, the tone in the Chinese market is a relatively stability for most cuts. In Brazil, the export market is “calm” and “it’s not easy” to find attractive options to sell the beef stocks that Brazilian packers have in cold depots, a trader commented. Even though 7-cut forequarters still get in China around US$/t 4,050 CIF, units trying to get higher prices don’t find a positive answer in the other side of the counter. At the same time, the Hong Kong market is as well reported “calm” and with “difficulties” for offal coming from the region. The source said that shin & shank from Brazil fell to less than US$/t 4,000 CIF, while the product from Paraguay is sold at US$/t 3,500 CIF. A Uruguayan exporter added that with such a low slaughter and perspectives of levelled prices for some more weeks, sales in that market are not easy. “Uruguay alone doesn’t move the needle; we depend on what happens with the offer from other markets like Brazil, Argentina and Paraguay”, the source indicated. He also said that Uruguayan plants “are unable to transfer raises of more than US$/kg 0.20 of cattle prices” into export values. The source reminded if international demand is unable to accept higher beef values, what usually happens is that they start to ask for cheaper cuts as a first option and then change to other protein sources like poultry or pork. Europe tends to stabilize; lower offer support values Hilton rump & loin destined to the European Union tended to stabilize in operations done up to late last week. Sources in Argentina mention a “market price” between US$/t 13,400 and 13,500, beyond some brand that may obtain higher values. In Uruguay, a holiday yesterday generated a “very calm” Monday, market operators told WBR. Prices remain between stable and slightly higher product of a limited offer, particularly for spot operations. The R&L reference in Uruguay is around US$/t 12,300- 12,500 FOB, but the industry understands that the floor with current cattle prices should be US$/t 12,600 FOB. The source added that after bulky European purchases in the first two weeks of July – particularly within the 481-quota – sales seem to have reacted in a more favourable way after some “blocked” days. The euro strengthened 0.8% yesterday to US$/€ 1.15 and that provides some more support to future sales. In Paraguay, the industry reports firmer prices for Hilton rump & loin at US$/t 11,200-11,300 FOB with “expectations” to reach US$/t 11,500 FOB by the end of the week. Chile recovers with purchases for national holidays After several weeks in which the Paraguayan industry faced problems to improve beef prices in the Chilean market, also product of a bigger availability of Brazilian beef, the trend changed during the past. The lower slaughter in Paraguay during the first two weeks of July and a bigger interest from Chilean importers to cover the high demand generated by September’s national holidays – the highest peak of consumption – affirmed export values around US$/t 5,100-5,200 CIF for the 20-cut mix. “We now hope to reach US$/t 5,400”, a Paraguayan exporter speculated. Stronger R$ curbs business with Russia Even though up to mid past week there were Brazilian sales of chuck & blade in Russia at US$/t 3,500 CIF, this week the exporting rhythm fell strongly product of a stronger Brazilian currency (R$) that yesterday reached R$/US$ 3.16. “At this value, accounts changed for exporters”, a trader indicated. Meanwhile, Russia offers US$/t 2,800 CIF for Brazilian trimming 80 VL but the product is easily sold in the local market due to the big reduction of JBS sales in the past months, the source explained. Brazil tries not to saturate Egyptian market In the last few weeks Brazilian units “loaded significant volumes” of full forequarters destined to Egypt at US$/t 3,550 CIF. “The market is now calmer because we don’t want to saturate it and throw prices down”, a trader explained, and added that the Saudi Arabian market remains “very weak”. The US keeps demand levels Although the US beef import market showed weaker for Australia in the past week, in Uruguay an exporter assured that “demand remains fluent” with a reference for in-quota 90 CL stabilized at US$/t 4,700 FOB. The exit of Brazil, jointly with better prices, allowed growing volumes exported from Uruguay. INAC reported shipments in the week to 8 July equivalent to 2,463 tons cwe, the highest weekly volume since the second week of September 2016. MARKETS Weaker dollar and post-season pushes Mercosur steer price up A new frustration for Trump’s administration after the rejection of the second intent to change the Obamacare program in Congress pushed the US dollar down in world markets. These facts could impede Trump’s commitment to reduce taxes and the economy strength increasing the possibility that the Fed may be forced to stretch the time to raise interest rates, so that investments in US dollars are again less attractive. Within that context, the Brazilian currency gained 2.9% in the week and accumulates a 5% recovery in the last four. Therefore, despite the falling average price of steers in the main beef exporting states – losing another R$/@ 1 in the week to R$/@ 120 – it gained 5 US cents to US$/kg 2.53 cw. In the rest of the region slaughter-ready cattle prices as well improved, mainly due to a seasonal offer reduction. Resulting from all this, the Mercosur Steer Index (WBR/MSI) climbed 4 US cents in the week to US$/kg 2.79 cw. (/site/index.php/en/component/banners/click/106) Brazil Live cattle exports 53% higher in June According to data divulged by the Ministry of Industry, Foreign Trade and Services, in June Brazil exported 25,000 cattle head valued in US$ 15.6 million. In comparison with May, the number of animals sold abroad grew 23.2% but the growth was 53.3% inter-annually. Of June’s total, 15,100 head were shipped to Turkey, by far today the main destination for live cattle from Brazil. Shipments to that market so far in the year reached 61,800 head, which corresponds to 49.3% of total live cattle exports, Scot Consultants reports. Court authorizes sale of JBS assets to Minerva An appeal court authorized the planned sale of the South American assets of JBS SA to competitor Minerva SA in US$ 300 million while the biggest world beef processor faces a federal investigation for corruption. On Wednesday afternoon, the Federal Regional Court of the First Region of Brasilia revoked the 21 June decision of Federal Judge Ricardo Leite that blocked the sale agreement. Leite argued that the sale of nine units in Argentina, Paraguay and Uruguay could affect the investigation against the Batista family. Judge Leite works in the same court that will study the collaboration agreement signed by Wesley and Joesley Batista – who control JBS through the conglomerate J&F Investimentos SA – with public prosecutors for their participation in a huge bribery case. JBS close to agree for millionaire debt with Brazilian creditors Main Brazilian creditors of JBS are ready to close an agreement to refinance debts of the beef processor for near R$ 18 billion (around US$ 5.625b) that mature within one year. Negotiations take place in a moment when the company goes through turbulences linked with the corruption scandal that involves the Batista brothers. The local banks Caixa Economica Federal, Santander Brasil, Banco do Brasil and Bradesco are trying to convince Itaú Unibanco to adhere to the plan by which JBS may obtain an enlarged 12-month payment term in exchange to an advanced payment of R$ 2 billion and extra guarantees, news agency Reuters informed. Market speculations include the possibility of JBS getting rid of assets for around R$ 20 billion (more than US$6b). Newspaper O Globo speculates that next sales may involve dairy company Vigor and the cellulose plant Eldorado, with Chilean Arauco as the main candidate to acquire it. MARKETS Persistent downward pressure over cattle prices The cattle market showed this week new downward adjustments on its reference prices. According to Scot Consultants, in most of the cattle regions supply is comfortable for the industrial needs, which, summed to slow beef sales in the wholesale market, drive industrial units to pressure prices further down. In Sao Paulo, the 30-day steer reference lost R$/@ 1.5 to R$/@ 126.