Scots warn of volatile prices if Brazil restrictions eased

A relaxing of trade restrictions on Brazilian beef could have a major impact on Scottish beef production, a leading expert has warned.

Speaking at a seminar on EU imports, organised by the Scottish Beef Cattle Association, the NBA (Scotland) and the NSA (Scotland), Stuart Ashworth, head of economic services with Quality Meat Scotland, said that while Brazilian imports had initially fallen since restrictions were applied in 2008, 2012 had seen imports double, although they remained 85% lower than in 2007.

He said that while there was not a huge likelihood that Brazil would be able to supply increased volumes of beef, the country was still keen to see trade tariffs reduced either through World Trade Organization, Mercosur or bilateral agreements.

Any reduction would have a number of effects on Scottish producers: “Clearly the first point of contention is that Brazilian beef would be available at much reduced prices. Irrespective of what the world price is, by removing Customs duties, the product would become cheaper. It would also be highly likely that this ‘cheaper product’ would be at world prices which are currently lower than European producer prices.

“A second impact would emerge from exporting nations ‘cherry picking’ what they supply around the globe – choosing the highest-value market for each different cut. The consequence of this for the importing nation with whole carcases to sell is that the overall ‘carcase balance’ in the market changes and individual carcase realisation values come under pressure.”

However, he urged caution among doomsayers concerned that the market would be flooded: “That would depend on the relative state of the global demand for beef and if the main demand lies outside the European Union, then that is where trade will take place.
“Nevertheless, it is inevitable that Scottish producer prices would move closer to world market prices, although they are still likely to retain a premium built on product quality and provenance.”

He said regardless of any increase in volume into the UK, the lowering of tariffs would create greater volatility in the market: “For example, during 2010 and into early 2011, the gap in beef prices between the major global beef exporters and Europe narrowed significantly.  However, as 2011 passed into 2012 and the global economy slowed down the gap has widened again.

“It is therefore impossible to say with certainty what a greater volume of Brazilian beef on the European market would do for Scottish producer prices. However, it is almost certain that it would lead to lower farmgate prices and greater volatility in those prices.”

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