With a record price, meat consumption is the lowest in 16 years

The mixture of high inflation and increasing poverty has taken beef off the menu of an increasing number of families in Brazil.

Consumption has been falling for three consecutive years in the country. In 2020, it retreated an expressive 10% compared to the previous one. For 2021, the estimate is a fall of 2%, a consumption of 5.24 million tons of beef, the lowest value in 12 years.

When considering consumption per person, the result is even more modest: 24.5 kg per year, close to the number registered in 2005, 16 years ago.

The estimate was calculated by the specialist of the Consultancy Agro at Itaú BBA Cesar de Castro Alves at the request of BBC News Brasil and is based on the so-called apparent consumption, that is, the production of inspected beef, discounted exports and added to imports.

The data used by Castro Alves consider an expectation of beef production of 7.4 million tons in carcass equivalent (TECs), exports of 2.26 million TECs and imports of 73 thousand TECs.

Higher prices and lower income

Both sides of the consumption equation — the price of goods and household income — deteriorated in 2021.

On the price side, meats saw a strong increase, especially in the first half. In June, considering the accumulated in 12 months, the Brazilian paid almost 40% more (38.17%) for the product than a year before.

Prices began to fall in September, but remain at a high level: in the 12 months ended in November, meat inflation was 10.81%, higher than the 8.9% index calculated for the entire food and beverage group.

Even with the reduction in some supermarkets, the product remains inaccessible for many families, especially considering that Brazilians’ income has been shrinking.

Data from Pnad Contínua (National Survey by Continuous Household Sample) show that the average real income (in other words, discounted for inflation) of those who are employed has been decreasing consecutively for 12 months, since October 2020.

This performance is closely related to the phenomenon of unemployment reduction, which has been observed since May this year: the jobs generated by the Brazilian economy are more precarious and pay low salaries, which explains the reduction in the average income per worker.

The unemployment rate, despite declining, remains at a very high level – 12.6% of the workforce in the third quarter of 2021, or 13.5 million unemployed.

why meat became so expensive

At least four factors explain why the price of meat rose so much in 2021: the high dollar, the drought that particularly affected the Center-South region of the country, the increase in corn and soybean prices and a lower availability of cattle (in this case , a structural issue linked to cattle farming).

The rise of the dollar and the drought help explain the significant increase in the price of commodities such as corn and soybeans. As these are raw materials for the production of feed for cattle, poultry and swine, feeding the animals has become more expensive.

In the case of cattle, the drought also affected production costs on another front: as it reduced pasture areas, it forced many producers to confine their cattle, further increasing feed expenses.

This whole situational issue took place at a time when the price of beef was already pressured by a structural issue in the sector. The price of cattle has been breaking records for months because there is less availability of animals for slaughter — a reflection of the bovine culture cycle itself, which includes the reproduction and replacement periods of the animals.

This is because the beef production chain has a series of particularities. It is not possible to increase and decrease the number of oxen in the pasture in a timely manner, depending on the level of demand.

The gestation time of cows is about 9 months. The period for a calf to become an animal ready for slaughter, in turn, is around two years. All of this makes the cycle longer than that of other proteins and lasts around 6 or 7 years.

When the price of oxen is high, as it is currently, the tendency is for cattle raisers to send the females (called “matrixes” in the sector) for slaughter. Gradually, the supply of animals increases and the price of cattle tends to decrease.

A smaller volume of females, however, means a smaller production of calves (called in the sector “replacement animals”). And that is why, at the next moment of the cycle, the trend is for an increase in the prices of calves.

This increase, in turn, encourages the retention of females, so that the prices of calves tend to gradually decline. With fewer females available for slaughter, the price of cattle starts to rise, and the cycle starts all over again.

Thus, the cycle that began in 2018, when the industry was beginning to recover from the impacts of Operation Carne Fraca, should extend until 2023 or 2024, as illustrated in an interview with BBC News Brasil by the livestock researcher at Cepea (Center for Advanced Studies in Applied Economics), from Esalq/USP, Thiago Bernardino de Carvalho.

“The chicken cycle, for example, is 60 days long — it’s much shorter.”

China’s embargo

Even the embargo imposed by China since September, which brought down Brazilian beef exports, was not able to substantially reduce prices.

The Asian country declared an embargo on Brazilian exports after identifying two cases of mad cow in slaughterhouses in Minas Gerais and Mato Grosso. Although the World Organization for Animal Health states that the cases were atypical and spontaneous and that, therefore, they did not present a risk to the production chain, the embargo is maintained.

The suspension of purchases by China caused a sharp drop in the price of beef in October, but this drop practically did not reach the pockets of consumers — that is, industrialized meat.

Among the explanations pointed out by Carvalho are, for example, the authorization given in October by the Ministry of Agriculture for storage for up to 60 days in containers (and not just in cold rooms, as the current sanitary legislation puts it) of what was produced before the blockade, on September 4th.

Thus, the industry can keep the product in stock and does not necessarily need to make the surplus available for the domestic market. This dynamic helped to keep prices high in the domestic market.

In late November, China gave the first sign of easing and allowed the export of certified meat at least until the day before the embargo (September 3), which was then shipped to Asia. Since then, the industry has been rebalancing its inventories, while the blockade remains in place.

Another factor mentioned by the researcher is the last link in the chain, retail. In his assessment, butchers and supermarkets took the opportunity to buy cheaper meat in October to stock up for the parties — and the storage process, which involves refrigeration, is costly, he points out.

“The consumer, if he can, will not give up meat, barbecue at the end of the year. He will cut other products first, and the supermarket knows that.”

There is also the possibility that retailers have taken advantage of part of the price reduction by suppliers to increase their profit margins.

This was the hypothesis raised in a hard note released at the end of October by the Union of Refrigerator Industries of Mato Grosso (Sindifrigo-MT), which called the difference in prices between wholesale and retail a “distortion” and stated that it showed “the greed of a link that does not want to be part of a chain”.

“Butcher and supermarket counters need to engage in the chain and not present themselves as enemies,” the statement concluded.