MONTEVIDEO – Three and a half to one.
That’s the ratio of cattle to people in Uruguay, a South American country that relies on exports of its prized beef to drive its economy and counts heavily on one overseas market in particular: China.
That Asian nation has become an ideal customer for Uruguayan cold-storage plants and currently ranks as the No. 1 destination for the South American country’s highly acclaimed beef, but the spread of the new Wuhan coronavirus has prompted fears of a sharp slowdown in that crucial market.
With Uruguay’s population totaling just 3.5 million, the domestic market is far too small for its formidable beef industry, which exports around 75 percent of its production to more than 60 countries, said the marketing manager of the National Meat Institute (INAC), Lautaro Perez.
China replaced Russia as the biggest importer of Uruguayan beef six years ago and its demand for that meat grew even more in 2019 after an epidemic of African Swine Fever took a devastating toll on the Asian nation’s pig herd and pork production.
China’s size, its low tariffs on Uruguayan beef and consumer demand for a wide range of cuts make that nation an ideal importer, Perez said.
Uruguayan beef exports to the Asian giant were valued at more than $1 billion in 2019, according to figures from Uruguay XXI, that country’s investment and export promotion agency and country brand, while the European Union and the United States came in a distant second and third at $300 million and $200 million, respectively.
But the trade relationship with China became more complicated late last year.
The sales manager of cold-storage plant operator Sirsil, Gabriel Slinger, told EFE that Chinese buyers started demanding a 30 percent discount on the price of Uruguayan beef and threatened to leave containers at the port or in the water if they didn’t get their way.
He said part of the reason was the release of contingency stocks onto the market by the Chinese government, while also pointing to a grey-market trade in bovine meat products that enter China via Hong Kong and Vietnam and are cheaper because they don’t pass through official import channels.
But now the main focal point of concerns for Uruguayan exporters is the novel coronavirus (2019-nCoV), whose epicenter is the central Chinese city of Wuhan.
With dozens of cities on lockdown and China gripped by a growing collective hysteria, Slinger said all signs point to a drop in meat consumption and that his company is waiting to see how market conditions develop in February.
Separately, 20 Uruguayan cold storage plants recently obtained halal certification – a document that guarantees that products and services aimed at the Muslim population meet the requirements of Islamic law – with a view to exporting beef and ovine meat to Saudi Arabia.
Although that market opening is seen as positive, Slinger said Uruguay will face stiff competition in Saudi Arabia from lower-priced Brazilian beef.
He also added that Saudi demand for beef is not as big as for sheep meat and that more work needs to be done to grow that business there.
Another market opening will occur soon in Vietnam, where Uruguay will be licensed to export beef in the first half of this year, said the director of the Uruguayan Livestock, Agriculture and Fisheries Ministry’s international affairs unit, Rodolfo Camarosano.
Meanwhile, Uruguay’s beef industry was displeased with the terms of the Mercosur-EU trade agreement, which was reached last year but is still pending ratification.
Camarosano said the annual quota on Uruguayan beef exports to the EU will fall to 19,000 tons, noting that in the past the country has exported “a great deal more” to that market.