CNBC reported Thursday that US President Donald Trump had imposed a 50% tariff rate on Brazil’s exports to the US on Aug. 1, as retaliation for what he called “unfair trade practices.”
The tariff increase sparked concerns in international markets of the shift in trade balances that likely will ensue. The US could import less Brazilian beef, which consists mostly of lean beef and trimmings, and pursue product from other countries.
The tariffs also were said to be in retaliation for the ongoing prosecution of the country’s former president, Jair Bolsonaro. There was no indication of a link saying President Trump could impose retaliatory tariffs on a country for the prosecution of a former president.
The tariff will go up from the 10% tariff rate that was imposed in early April, and Brazilian President Luiz Inacio Lula da Silva said his country would respond with reciprocal tariffs.
HOW IT WILL AFFECT BEEF TRADE
According to the USDA’s Agricultural Marketing Service and the Livestock, Poultry and Grain Market News, the US last week imported 7,894 tonnes of meat from Brazil, making for a year-to-date total of 205,060 tonnes. By this time last year, the US had imported 110,964 tonnes, an 85% increase.
But not all of that was beef. Last week, the US imported 5,935 tonnes of Brazilian beef, bringing this year’s to-date total to 164,905 tonnes, up 115% from last year’s year-to-date total of 76,815 tonnes.
In addition to importing more lean beef from other countries, the US market could seek out domestic beef and beef trimmings. But this would be very difficult since US beef production is geared toward a consumer who wants mostly USDA choice grade beef, which is fattier.
US consumers do like leaner beef when it comes to ground beef, to the US market would have to change to paying higher prices for lean beef to induce a seismic shift in breeding and rearing of beef cattle in this country – a prospect that could take years, or even decades, to do.
HOW WILL CONSUMERS RESPOND?
The real test of this new normal will be the US consumer. Many already are recoiling from high beef prices at the grocer’s, and further gains in the more versatile hamburger could send many of them searching for alternative meats, a market analyst said. Most probably already are cutting back on the amount they purchase. Many more are shifting to different beef cuts than their preferred ones.
But experience shows they won’t be switching pork in any great numbers, the analyst said. If they switch meats, they will go to chicken.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $224.82 per cwt to $233.02, compared with last week’s range of $225.63 to $236.67 per cwt. FOB dressed steers, and heifers went for $354.61 per cwt to $365.41, compared with $353.56 to $365.67.
The USDA choice cutout Thursday was down $1.79 per cwt at $384.66 while select was off $2.41 at $370.86. The choice/select spread widened to $13.80 from $13.18 with 54 loads of fabricated product and 15 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef was $415.91 per cwt, and 50% beef was $268.14.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.30 to $1.45 a bushel over the Sep corn contract, which settled at $3.99 1/4, unchanged.
The CME Feeder Cattle Index for the seven days ended Wednesday was $321.84 per cwt, up $5.08. This compares with Thursday’s Aug contract settlement of $321.27, up $0.80.