Brazil Live Cattle Prices Hit Record High, Driven by Strong Dollar, Tight Supply, and Exports to China(Nov 6)

Brazil Live Cattle Prices Hit Record High, Driven by Strong Dollar, Tight Supply, and Exports to China

The resumption of Chinese purchases, strong exports to the United States, reduced supply of slaughter-ready cattle due to livestock cycle effects, and the recent appreciation of the US dollar against the Brazilian real have driven the price of live cattle per arroba in Brazil close to 400 reais, a historic high that is impacting beef consumers.

According to Reuters, data from the Cepea research center shows that in Sao Paulo state, which serves as a bellwether for the world's largest beef producer and exporter market, the price per arroba is reported at approximately 390 reais, with a cumulative increase of over 20% year-to-date, one-third of which occurred in October.

Key Price Drivers

Recent factors driving price increases include: demand from the Chinese market, with China expected to resume beef imports from Brazil between November and December to fill the 2027 low-tariff quota; additionally, the US dollar exchange rate rose 9.15% following the market reaction to the second round of the presidential election results last week.

As the largest importing country, China returned to the Brazilian market after its 2026 tariff quota was exhausted around mid-year. In 2027, China will allocate an import quota of 1.128 million tons of Brazilian beef subject to a 12% tariff, while imports exceeding this quota will face a rate of 55%.

"The market holds positive expectations for China's resumption of purchases," said Joao Figueiredo, head of the livestock division at consulting firm Datagro.

He noted that, based on surveys conducted by the consulting firm for compiling price indicators, some transaction prices with export-oriented meat processing enterprises have already reached 400 reais per arroba.

In addition to external demand, he mentioned that even enterprises focused on the domestic market have conducted transactions at 400 reais. The domestic market typically becomes more active toward year-end due to the holiday season.

However, he believes that the ceiling for live cattle transactions destined for the Brazilian domestic market is 400 reais per arroba, as prices exceeding this level would begin to affect local consumption.

"Prices may be sustained for some time before year-end, but they are already approaching the peak," Figueiredo assessed, also noting that concerns about domestic demand in 2027 exist given potential fiscal adjustment measures the government may adopt.

Supply and Demand Outlook

Thiago Bernardino de Carvalho, a researcher at the Advanced Center for Applied Economics (Cepea) at the Luiz de Queiroz College of Agriculture (Esalq/USP), believes that due to tight supply, combined with Chinese market demand and US procurement, there is limited room for live cattle price correction before year-end, or even in the first half of next year.

"Our beef prices are indeed rising, which is reflected in live cattle prices," he stated, while also believing that domestic consumption volume will not change before year-end. "Therefore, with supply and demand so balanced, prices are unlikely to fall," he said.

"From a consumer perspective, if you want to eat beef, you have to pay higher prices... so the entire supply chain will undergo adjustments... fatteners, those who buy calves and lean cattle for fattening, also face high procurement costs," the expert noted. The price spread between live cattle procurement prices and beef sales prices has now fallen to one of its lowest levels since 2023.

Analysts believe this situation will eventually reach equilibrium. Pimentel noted that as live cattle prices surge, meat processing enterprises' initial profit margins have narrowed, but this will be compensated in the future as export prices rise and China and the US increase purchase volumes, thereby supporting export prices.

"We are first expanding exports to the United States, because that is where the lucrative market is," she said. The United States is the second-largest export destination for Brazilian beef.