You know that feeling we get that something has already happened and we think: “wait a minute, I've seen this happen before, it's not the first time.” That is called Déjà vu. According to Wikipedia, this word refers to the psychological reaction of transmitting the idea that one has been in that place before, has seen those people, or some other external element. That is exactly what we are going through in the cattle market; once again we woke up to the bombshell news of the confirmation, yet again, of an atypical case of Bovine Spongiform Encephalopathy (BSE), popularly known as “mad cow disease.”.
Unlike in 2021, when cases were identified in slaughterhouses, this time the action took place on a farm in the state of Pará, which promptly slaughtered the animal and took farm containment measures after the case was confirmed. It is worth noting that Brazil, according to the World Health Organization, is considered a country with practically zero risk for the occurrence of the disease naturally, when the animal is treated with feed of animal origin. In any case, even though the case was isolated and the laboratory result released on February 22 was deemed atypical, Brazil strictly followed the contract with China by suspending animal slaughter, something that needs to be approved by the Chinese government to be resumed.
If we do a rough calculation, Brazil exports between 25 and 30% of its meat production to foreign markets, with China accounting for 57% of that market. As a result, overnight, we lost between 14.3% and 17.1% in sales. In monetary terms, China accounted for $485.3 million in trade in January, according to information released by the Foreign Trade Secretariat.
As a result, the market for fat cattle remains sluggish, with prices falling steadily. March closed with an average price for the first 15 days of 274.62 reais/@, a decrease of 5.21% compared to February and -20.33% compared to March 2022. Meatpackers also saw a sharp decline in operations; JBS shares closed last month down 4.3%, and for Minerva—which operates heavily in the export market—the decline was 7.9%.
Now for everyone working in the industry, the big question is: what will the déjà vu of China's return to buying look like, similar to 2019 or 2021? What we all expected was for the resolution to be like 2019, one week, but judging by how things are going, we might be close to the latter case. We still have no information or at least a reliable source that the embargo is coming to an end, and we are left waiting for the Chinese government to make its decision.