April 3, 2017

Import Restrictions Resulting from Brazilian Meat Scandal Easing

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

It has been two and a half weeks since the Brazilian Federal Police announced their Carne Fraca investigation that sent the meat sector reeling in Brazil. After the initial announcement that meat inspectors had been paid bribes to certify tainted meat, 25 international markets either completely banned or partially banned Brazilian meat imports. The initial "consumer panic" has started to wear off and most of those markets that had placed a complete ban on Brazilian meat have modified the ban to only the 21 processing facilities implicated in the investigation.

Even with the lifting of most of the complete bans, the meat sector certainly received a "black eye" and damage has already been done. The Minister of Agriculture has closed six of the plants under investigation and restricted the processing in some of the other implicated facilities. The Minister has also taken great pains to try and assure the public that this was not a systemic failure of the system, but rather isolated instances. He emphasized that Brazil has 4,383 food processing facilities that are inspected by the federal government, but only 21 are implicated in the scandal.

The Ministry indicated that they have examined all the products at the implicated facilities and did not find any products that would pose a risk to the public. The Minister also tried to walk back some of the accusations levied by the Federal Police. He stated that the acid quoted in the investigation was actually ascorbic acid which is used to preserve meat and that it is not considered carcinogenic and that the acid was authorized to be used on only 0.02% of the neat.

Another accusation that caught the public's attention was that meat from the head of the hogs was used to produce sausage. He indicated that this is a common practice worldwide and it posed no risk to the consuming public.

Fallout from the scandal has been swift as meat processors reduce production in order to adjust their inventory due to the reduced export sales and lower domestic consumption since the scandal was announced. JBS announced last week that 10 of their 36 beef processing facilities in Brazil will shut down for 20 days starting April 3rd. They include 3 facilities in Mato Grosso do Sul, 4 in Mato Grosso, 1 in Goias, 1 in Sao Paulo, and 1 in Para. They also indicated that the shutdown may be extended another 10 days depending on inventory levels.

Other processing facilities in Brazil have also slowed production or closed temporarily in an effort to avoid accumulating excess inventory. Industry officials have urged the Federal Police to proceed with their investigation as quickly as possible and as transparently as possible in order to lift the cloud hanging over the entire meat sector in Brazil.