With the going Olympics games, the Brazilians seems to have found favour in the sight of the United States of America when the USDA officially announced the reopening of trade with Brazil, in the form of fresh and frozen beef, recently.
Brazil which currently exports cooked and canned beef to the US, are now to export fresh and frozen beef the first time since 2003.It is of note that fresh Brazilian beef had been banned because the country was classified under Nations affected with foot-and-mouth disease (FMD). The USDA’s after a risk analysis conducted by its Animal and Plant Health Inspection Agency (APHIS), the Brazilian Cattle farmers were given a pass to initiate trade of fresh beef on the conclusion that risk to US livestock was “low”.
America Cattle Stakeholders are showing great concern with this development, aside from the animal health aspects, the increasing domestic cattle herd and the level of increasing supply of beef and to what level will the US import Brazilian beef and how will that impact their market.
The stakeholders stressed that the Food Safety and Inspection Service has not approved any specific Brazilian plants, yet and to export fresh beef to the US this will have to be done before any fresh beef shipments to the US take place.
They added that due to Tariff Rate Quotas, Brazil will have relatively limited access to the US market, at least for a few years as Tariff Rate Quotas (TRQ’s) are assigned to countries exporting product to the US, who do not have a free trade agreement with US.
The TRQ definition is a certain country, or group of countries that are free to export fresh beef to the US up to a certain volume limit, after that limit a hefty quota (tax) is applied to the beef making it relatively more expensive than other options. However, Brazil is not included among the country specific quota to export to the US, they will be classified in the TRQ group labelled “Other” that has to contest with other countries to supply a maximum volume 64,805 metric tons (mt), as approved countries without a country specific quota can ship under the “others” TRQ until the 64,805 mt is reached. More so it should be noted that the quota is first-come, first-serve for these countries.
Furthermore, all imports within quota (country specific and other) pay 4.4 cents per kilogram beef exported to the US, except for Free Trade Agreement partners which are duty free and all fresh beef exports to the US, over quota limits, pay 26.4 per cent ad valorem tax.
What this mean for Brazil, US market expert argues is that in 2015, 68 per cent of the “other” TRQ was utilised by Nicaragua, Honduras, Costa Rica, and Ireland as this would have only left 20,738 mt of quota volume to Brazil. While this is an oversimplification due to the first-come first-served nature of the quota, it demonstrates that Brazil will have competition in the quota space.
Although the maximum limit of Brazilian beef exported to the US could be 64,508 mt, based on market competition it is very unrealistic to think Brazil would overtake the full quota. Longer term (in 2020) these TRQ’s are scheduled to change, and could give Brazil a higher volume ceiling.