Sydney, 28th of April of 2011.

Implement International Relationship Strategies

Prof.: Marcus Bear

Beef Market – Brazil x US .

Juliano Goulart Cezar jgcezar@hotmail.com Summary:

Title Page 1. Introduction …………………………………………………………………………………………………………………. 3

2. WORLD ………………………………………………………………………………………………………………………… 4 3.1. Overview of Global Market ………………………………………………………………………………………….. 4 3.2. Mundial Herd, a brief report ………………………………………………………………………………………… 4
Table 1: World - cattle, major countries (million head) ………………………………………………………… 4
Table 2: Global Beef Production (thousand ton) …………………………………………………………………. 4 3.3. Export world beef and veal consumption and leading exporters. ………………………………… 5
Table 3: World - Exports of beef and veal, main countries
(Thousand tones carcass equivalent) …………………………………………………………………………………… 5

3. BRAZIL ………………………………………………………………………………………………………………………….. 5 3.1. Cultural Facts – Brazil and the tradition od eating beef …………………………………………………5 3.2. Emerging Global Role …………………………………………………………………………………………………… 6 3.3. Foreign and Trade Policy ……………………………………………………………………………………………… 6 3.4. Brazilian Beef Market …………………………………………………………………………………………………… 6
Table 4: Data on the Brazilian Beef Market …………………………………………………………………………. 6 3.5. Brazilian Beef System …………………………………………………………………………………………………… 7 3.6.1. Subsystem for Support ………………………………………………………………………………………….. 7 3.6.2. Subsystem of marketing.……………………………………………………………………………………….. 7 3.6. Relations with the United States ………………………………………………………………………………….. 7

3. UNITED STATES ……………………………………………………………………………………………………………. 7 4.7. The Battle to Control the U.S. Meat Market …………………………………………………………………. 7 4.8. U.S. Meat Exports ………………………………………………………………………………………………………… 7
Picture 1: US Meat Exports ………………………………………………………………………………………………….. 8 4.9. 100 years of meat: chicken consumption is the fastest growing in the U.S. …………………. 8
Picture 2: U.S. Meat Consumption. …………………………………………………………………………………….. 9

4. Comparison between Brazil and U.S. Beef Market ………………………………………………………. 9 5.10. Method ……………………………………………………………………………………………………………………….. 9 5.11. Results and Discussion …………………………………………………………………………………………………. 9
Table 5: Comparison of beef cuts in Brazil, Australia and the U.S. …………………………………….… 10
Picture 3: U.S. Beef Cuts …………………………………………………………………………………………………….. 10
Picture 4: Brazil Beef Cuts …………………………………………………………………………………………………… 11
Table 6: Cuts per part – Translation …………………………………………………………………………………….. 11

5. CONCLUSION ………………………………………………………………………………………………………………… 12

1. Introduction

Brazil has the largest commercial cattle herd in the world with approximately 166 million heads, representing around 16% of the world flock (Alves, 2005).

Brazilian agribusiness has become in recent years a great attraction in the global food production, with a gross domestic product in 2004 of 154,915,370,000, relating to the participation of agriculture (CAN 2005) and the center for advanced studies in economics Applied University of São Paulo (CEPEA / USP - 2005), the agribusiness sectors as meat and soy complex, has played important roles in the overall exports of the country and injecting new dividends for the trade balance.

The incorporation of new technologies and more efficient use of inputs and larger scale have caused a progressive increase in the supply of beef, offsetting the growth in population. With greater supply than demand, the product is reduced in price. So in this scenario, only the activity remains pastoralists who fit this new order, a scale production at competitive costs and offering a differentiated product quality (ET ABRAHÃO al., 2005).

Nowadays the market lives around the needs and tastes of consumers and this influences the entire production chain, causing changes in cutting patterns according to the country you are exporting.

The aim of the review is to present the difference between the Brazilian cut and North United States cut.

2. WORLD

2.1. Overview of Global Market
The purpose of this chapter is to describe the flow of trade in beef with the U.S. It is important to know both the behavior of the supplier and customer, as the role played by individual countries. Thus sets up the scene to corroborate or rectify the possible strategies of business between Brazil and U.S.

2.2. Mundial Herd, a brief report
As a way to map and clarify the cattle worldwide the following table shows the number of livestock per country.

Table 1: World - cattle, major countries (million head) Country | 1995 | 1999 | 2003 | 2006 | Brazil | 161,2 | 164,9 | 195,6 | 207,0 | Australia | 25,7 | 26,6 | 26,7 | 27,8 | India | 201,7 | 195,1 | 187,4 | 185,0 | United States | 102,8 | 99,1 | 96,1 | 95,8 | Argentina | 52,6 | 49,1 | 50,9 | 50,8 | China | 100,6 | 101,8 | 108,3 | 115,2 | World | 1.325,2 | 1.313,1 | 1.351,2 | 1376,0 |
(Source: Production chain of beef / Ministry of Agriculture, Livestock and Supply Agricultural Policy Secretariat, Inter-American Institute for Cooperation on Agriculture; Antonio Otavio Marcio Buainain and Mario Battle (coordinators). - Brasilia: IICA: MAP / SPA,2007.)

Only Brazil and China, among the five countries holding the world's largest herds have increased their herds in the period. India and Argentina saw United States shrink their herds in the studied decade. The growth of Chinese production is primarily intended to supply the domestic market. It is worth mentioning that about 50% of world cattle herd is concentrated in the hands of five countries.

The data in Table 2 show the production of beef and veal of the largest producers. United States, Brazil and China rank as the three largest countries individual producers, although the largest herds belonging to Brazil, India and China (Table 1), in that order. It appears that the biggest herds in itself, does not characterize the better performance in beef production. Only seven of the ten countries that have the largest herds are among the ten largest producers of beef in 2005. Member United, for example, that are holding the fourth flock worldwide, present with the rank of major meat producer in the world.

The global beef production is stabilized in the period from 1994 to 2000.

Table 2: – Global Beef Production (thousand ton) Year | Beef | 1994 | 48.565 | 1995 | 49.051 | 1996 | 48.391 | 1997 | 49.481 | 1998 | 49.032 | 1999 | 49.007 | 2000 | 49.081 | 2001 | 50.735 | (Source: USDA and FNP) | 2.3. Export world beef and veal consumption and leading exporters.
The evolution of the world's largest exporters of beef is presented in Table 3. Brazil and Australia are among the leading countries in export volume. By 2003, the United States were major exporters. However, their position deteriorated significantly as a result of BSE in 2002. Brazilian exports, in contrast, showed a significant average increase of 21.5% per year from 1995 to 2006. Australia, despite being the eighth largest producer of beef, you can generate surpluses exportable enough to position it as the second largest exporter of the product.

Only from 2004, Brazilian exports to the international market, outperformed the Australian. The export performance of India is also noteworthy. In the decade analyzed in Table 3, this country has seen its exports grow more than three times.

Table 3: World - Exports of beef and veal, main countries (thousand tones carcass equivalent) Country | 1995 | 1999 | 2003 | 2006 | Brazil | 228 | 464 | 1.175 | 2.109 | Australia | 1.109 | 1.270 | 1.264 | 1.459 | India | 196 | 224 | 439 | 750 | New Zealand | 497 | 443 | 558 | 541 | United States | 826 | 1.094 | 1.143 | 523 | Uruguai | 149 | 189 | 325 | 510 | Argentina | 535 | 359 | 386 | 556 | Canada | 245 | 492 | 383 | 440 | UE | - | 897 | 388 | 220 | China | 107 | 57 | 43 | 99 | World | 5.453 | 5.724 | 6.339 | 7.273 |
(Source: Production chain of beef / Ministry of Agriculture, Livestock and Supply Agricultural Policy Secretariat, Inter-American Institute for Cooperation on Agriculture; Antonio Otavio Marcio Buainain and Mario Battle (coordinators). - Brasilia: IICA: MAP / SPA,2007.)

2. BRAZIL

3.4. Cultural Facts - Brazil and the tradition of eating beef.

Since Brazil became a colony from Portugal and Spain the tradition of having beef as a part of the diet started.
Spanish, more than Portuguese’s as they eat a lot of fish, were the ones which brought the beef meat tradition and from the boarders from Argentina, Uruguay and Paraguay the barbecue tradition as South American’s know it today.
From north to south Brazil the produce of beef is very strong and the country became one of the biggest exporter of the world, as it is, along with US, the biggest consumer of beef.
As an example of how big the meat market is in Brazil, barbecue is one of most traditional recipes. Different regions of the country have their own method but the ingredient is always the same.
The top quality meat used in Brazilian barbecue is Picanha (Top Sirilon Cap). http://www.quantifiedmarketing.com/press/brazilian-meat.php 3.5. Emerging Global Role
As the country has consolidated its power in South America and extended its influence to the broader region, Brazil has also become increasingly prominent on the world stage. Brazil’s global reach is largely the result of its fast-growing economy, which is the tenth largest in the world. The country is rich in natural resources and possesses a dynamic agricultural sector. Brazil is the top exporter of coffee, orange juice, sugar, chicken, beef, and soy; the second largest producer of ethanol; and the third largest exporter of agricultural products. Brazil also has a relatively balanced trade regime: Its main trading partners in 2008 were the European Union (24% of exports, 22% of imports), the United States (14% of exports, 15% of imports), China (8% of exports, 12% of imports), and its neighbors in Mercosur (11% of exports, 9% of imports).50 These factors, in addition to President Lula’s focus on improving relations with other leaders of the developing “South,” have made Brazil one of the most important leaders of the G-20 group of emerging nations and a top player in the Doha Round of World Trade Organization (WTO) negotiations.

3.6. Foreign and Trade Policy
Brazil’s foreign policy is a byproduct of the country’s unique position as a regional power in Latin America, a leader among developing countries in economic cooperation and collective security efforts, and an emerging world power. Brazilian foreign policy has been based on the principles of multilateralism, peaceful dispute settlement, and nonintervention in the affairs of other countries.32 Brazil engages in multilateral diplomacy through a variety of sub-regional organizations—including Mercosur, the Union of South American Nations (UNASUR), and the Rio Group—as well as through the Organization of America States (OAS) and the United Nations.

3.7. Brazilian Beef Market
The dimension of the beef business in Brazil is extremely large. Cattle of almost 160 million heads, producing 7 million tons of meat a year, forecasted to export about 750 thousand tons in 2001 (bringing to the country about US$ 1 billion a year). The internal consumption is somewhat stabilized and imports are decreasing. It is worth to highlight that Brazil produces 13% of the global beef production.

Table 4: Data on the Brazilian Beef Market | 1994 | 1997 | 2001 | Cattle (Million heads) | 151,8 | 153,6 | 161,8 | Production (Mil Tons Eq.Carc) | 5.852 | 6.409 | 7.022 | Per Capita Consumption (kg/per/year) | 36,4 | 39 | 36,8 | Exports (Thousands tons. Eq. Carc.) | 376 | 287 | 710 | Imports (Mil Tons Eq. Carc.) | 86 | 112 | 36 | Value of Exports (million US$) | 555 | 428 | 950 | (Source: FNP Consultant) |

3.8. Brazilian Beef System

3.9.1. Subsystem for Support
- Rural businesses that generate create and fatten the animals to meet the needs of the industry’s first processing; can be integrated into a single enterprise or decoupled in several ventures.
- Subsystem of Industrialization:
- Industry first processing: slaughter the animals and get the pieces of meat, according to the conditions of use needed for the other actors in the chain, and
- Industries of the second transformation: incorporating the meat in their products or add value to it.

3.9.2. Subsystem of marketing:
- Wholesalers and exporters, agents perform the role of storage and/or delivery, simplifying the market process.
- Retailers: perform direct sales of beef to the ultimate consumer, such as supermarkets and butchers, and
- Companies collective food / institutional market or those who use the meat product as facilitator, restaurants, hotels, hospitals, schools, prisons and fast-food companies.
- Subsystem consumption:
- End user share responsible for the acquisition, through the preparation and the use of the final product. Determine the desired characteristics in the product, influencing production systems of all the productive chain.

3.9. Relations with the United States
Currently, relations between the United States and Brazil may be characterized as friendly. The United States has increasingly regarded Brazil as a significant power, especially in its role as a stabilizing force in Latin America. U.S. officials assert that the United States seeks to increase cooperation with moderate leftist governments in Latin America (like Brazil) in order to ease mounting tensions among countries in South America, and to deal with populist governments in the region.

3. UNITED STATES

4.10. The Battle to Control the U.S. Meat Market
It's no secret that most of the meat consumed in the United States comes from large conglomerates whose focus on efficiency and large scale production seldom take environmental or animal welfare issues into account. According to Grist, this tight-knit circle of "meat titans" could get even smaller with the possible takeover of Smithfield by the Brazilian meat-packing company JBS. This would result in just three companies—Tyson, Cargill, and JBS—exerting immense control over what animals Americans consume, as well as how those animals are treated.

4.11. U.S. Meat Exports
U.S. meat exports rise throughout the projections, reflecting improved global economic growth and rising demand for meats. The United States becomes a net beef exporter near the end of the baseline. The United States remains the primary source of high-quality, fed beef for export, including exports for hotel-restaurant trade, largely to Pacific Rim nations. Pacific Rim nations and Mexico remain key markets for long-term growth of U.S. pork exports. Canada will be a strong pork trade competitor in these markets. Poultry exports to Asia are projected to expand through the baseline period, even with growing domestic broiler production in China. Poultry exports to Mexico, Central America, and the Caribbean also increase. Growth in poultry exports to Russia is projected, reflecting improved economic conditions there.
(Source: www.ers.usda.gov)

Picture 1: US Meat Exports.

4.12. 100 years of meat: chicken consumption is the fastest growing in the U.S.
Campinas, April 27, 2010 - The market surveillance conducted by the Department of Agriculture (USDA) shows that in the 100 years between 1909 and 2008 the per capita consumption of meat in the country increased by over 60% from just over 70 kg at the beginning of the twentieth century to nearly 115 kg in the first decade of this century.

However, the participation of each of the three major meats - beef, pork and chicken - had the same trend. Thus, for example, the consumption of pork recorded its height (40 kg per capita) in the 1940s (WWII). But in 2008 came with only 29 kg per capita, i.e., slightly lower than that recorded in 1909 (30.4 kg per capita).

The beef had a pattern quite similar to the pork in the first half of the twentieth century. But in the second half, while consumption of pork is stabilized, the beef continued to increase until approaching (1970) of 60 kg per capita. But from then regresses stronger than pork, arriving at 2008 with a growth of 23% compared to 1909, but set back almost 30% from the peak year of 1970.

In summary, therefore, the great contribution to the increase of more than 60% in the consumption of meat came from the chicken, whose per capita increased 540% in 100 years, which means that spent less than 7 kg to over 44 kg per capita. But this strong expansion was concentrated in the second half of the twentieth century, which makes the chicken a post-war food.
(Source: www.agribizz.blogspot.com)

Picture 2: US Meat Consumption.
USA
A century of evolution in consumption of beef, pork and chicken
1909 to 2008 (KG PER CAPITA)
Source of basic data: USDA
Preparation and analysis: AVISITE
PORK
BEFF
CHICKEN
USA
A century of evolution in consumption of beef, pork and chicken
1909 to 2008 (KG PER CAPITA)
Source of basic data: USDA
Preparation and analysis: AVISITE
PORK
BEFF
CHICKEN

4. Comparison between Brazil and US Beef Market

5.13. Method
As far as was possible, doing a literature review, we determined the equivalence of standards for each country being able to compare equivalent cuts between different systems. This is not due to differences in methods of cuts, because all the cuts were precisely equivalent shares, only some cuts could be compared, and in this paper, an approximate equivalence was determined based on the corresponding muscles, skeleton and preparation bases of cuts Meat primary and final.

5.14. Results and Discussion
Each of the sections are divided according to the standards of each market. Table 1 shows the main sections in each country, and equivalent to each other. Several points stand out from these comparisons. The Brazilian courts tend to separate cuts of beef along more anatomical divisions, compared with Australians and Americans, corresponding to the same muscles. This can be observed due to differences in processing, the relative costs of labor and mechanization in different countries. In Australia and the U.S., refrigerators process more animals per day, and have labor costs higher than in Brazil.

So, to minimize work and maximize production, Packers (refrigerators) process in these countries bigger cuts and less anatomic, where use mechanical means (e.g., band saws) when compared to production cuts produced "by hand" in Brazil. For this and other reasons (for example, cultural similarities), cuts in Australia and the U.S. are more similar to each other than with Brazilian courts.
Table 5: Comparison of beef cuts in Brazil, Australia and the USA. BRAZIL | UNITED STATES | AUSTRALIA | Coxão Mole | Outside round (flat) | Outside Flat | Picanha - Lombo | Top Sirloin cap | Rump cap | Alcatra | Top Sirloin butt (Round eye) | Rostbiff | Filé Mignon | Full Tenderloin | Tenderloin | Contra Filé | Strip loin / Rib eye | Sirloin | Acem | Chuck roll | Chuck roll | Pescoço | Neck | Neck | Tatu | Beef round (Primal) | Pistola hindquarter | Patinho | Knuckle, peeled (ball tip) | Knuckle | Costela | Back Ribs | Ribs Ends | Peito | Brisket | Brisket point end plate | Vazio | Flank steak | Thin flank | Coxão Duro | Top (inside) round | Topside / inside | Maminha | Bottom sirloin butt (Tri-tip) | Bottom sirloin Triangle (Tritip) |
(Source: Production chain of beef / Ministry of Agriculture, Livestock and Supply Agricultural Policy Secretariat, Inter-American Institute for Cooperation on Agriculture; Antonio Otavio Marcio Buainain and Mario Battle (coordinators). - Brasilia: IICA: MAP / SPA,2007.)

Picture 3: US Beef Cuts

Hindquarter
Forequarter
Hindquarter
Forequarter

Hindquarter
Forequarter
Hindquarter
Forequarter
Picture 4: Brazil Beef Cuts.

Table 6: Cuts per part - Translation Part (Parte) | Corte | Cut | Hindquarter(Quarto Traseiro) | Músculo duro | Hard muscle | | Músculo mole | Soft muscle | | Lagarto | Lizard | | Coxão mole (medial) | Outside round (flat) | | Coxão duro (layeral) | Top (inside) round | | Patinho | Knuckle, peeled (ball tip) | | Alcatra | Top Sirloin butt (Round eye) | | Vazio | Flank steak | | Lombo - Picanha | Top Sirloin cap | | Costela do traseiro | Back Ribs | Forequarter(Quarto Dianteiro) | Acém | Chuck roll | | Peito | Brisket | | Pescoço | Neck | | Paleta | Shank |

5. CONCLUSION

Beef market is growing every year and the relationship between BR and US is to become even more exclusive for its unique quality, geography and dedicate technique.

There are people who advocate the unification of beef cuts, it would facilitate international trade and simplify communication between exporters and importers, but not easy to change a tradition behind each cut.

As mentioned in the text, each country has their difficulties in production and this can make your product expensive or cheap. Thus, we get Brazilians to the U.S. probably will not easily find our famous steak, but if we want to pay dearly, whom we offer.