The US International Trade Commission study is titled Brazil: Competitive Factors in Brazil Affecting US and Brazilian Agriculture Sales in Selected Third Country Markets.
Brazil’s competitiveness in broiler exports compared with the US is enhanced by product differentiation and Brazil’s being avian influenza-free. Both countries dominate global export markets for poultry because they are the most cost competitive in the world.
However, competition between the two countries is limited. Brazil and the US usually export different products to different countries. While US producers focus primarily on the domestic market, exporting mostly surplus cuts, the Brazilian poultry industry is more dependent on overseas customers, especially those requiring halal standards (Middle East) and hand-cut production (Japan).
Brazil’s competitiveness is further enhanced by its industry’s willingness to produce poultry that is custom processed and packaged to major customers’ demands. That country’s avian-influenza-free status also gives it an advantage over the US in markets such as Japan and China.
However, high transportation costs, the higher value of Brazil’s currency (the real) and rising labor costs are offsetting Brazilian competitive advantages. Last year, Brazil’s top five agricultural exports (in value) were soybeans, cane sugar, coffee, frozen chicken cuts and frozen boneless beef. The top five for the US were soybeans, corn, wheat, cotton and processed foods.
A number of significant obstacles are impacting Brazilian agricultural export potential and these issues are expected to continue to create a drag on Brazil’s agricultural production and exports. Although Brazil has natural endowments and untapped land, much of its available farmland is in areas lacking good access to transportation infrastructure. Despite government efforts in this area, increasing demands for transportation, storage and port infrastructure and capacity will likely outpace supply for quite some time. What’s more, high interest rates and currency appreciation are expected to continue in the near future resulting in more expensive exports.
Brazil’s livestock-disease issues are years away from being resolved, and growing environmental and social demands will take government resources away from other investments. The country’s labor laws and tax structures also increase costs. Brazilian exports may grow more slowly in this environment, particularly if rising domestic demand saps Brazilian agricultural supplies from third-country markets, according to the report.
Cargill, Bunge, Archer Daniels Midland and Louis Dreyfus (the “Big Four” multinational agribusiness firms) play a major role in Brazil’s agricultural competitiveness and Brazil’s approach to world markets. These businesses account for a significant share of Brazilian agricultural exports, particularly in the grain and soybean markets.
Due to their global presence, these companies generally do not view global markets in terms of competition between large producing countries, such as Brazil and the US. They view the principal exporting countries as an integrated system on which they depend to supply growing worldwide demand. Increasing animal protein consumption, in particular, is boosting demand for beef, pork, and poultry, grains and soybean meal used for animal feed.
