Hopes high for improved market access in Europe, China and Indonesia
Brazil, the world’s largest poultry exporter, could soon be able to take advantage of new openings in Europe thanks to a free trade agreement between the EU and South America’s Mercosur trade bloc.
It the deal goes ahead as planned, Brazilian exporters will likely take the lion’s share of the additional 180,000 tonne quota included in the deal. They will also be hoping the agreement helps smooth the way for the EU to relax its strict rules on Salmonella in salted chicken.
Brazil’s Animal Protein Association, the ABPA, has been spearheading efforts to challenge EU rules, which saw dozens of shipments turned back at EU ports in 2018, triggering a ban on some of Brazil’s largest poultry suppliers.
It has also been working to restore confidence in Brazilian chicken through the launch of a new scientific committee in Europe.
Here, in an exclusive interview with IEG Vu, ABPA’s vice president and director of markets Ricardo Santin, gives his views on recent developments – ranging from the EU-Mercosur deal to Brazil’s challenge to Indonesian poultry import barriers at the World Trade Organization. Santin, who is also vice-president of the International Poultry Council, was present in the EU-Mercosur talks, that came to a successful conclusion last week.How much of Mercosur’s 180,000 tonne chicken quota is expected to be taken up by Brazil?Brazil, in view of its productive efficiency, should fulfil almost 100% of the quota allocated to Mercosur countries.What is the reaction of France, a major producer of this protein in the EU, with respect to Mercosur’s quota?The free trade agreement between Mercosur and the European Union is an agreement that will benefit all countries of the two blocs, even in the face of misconceptions that Brazilian products are not safe. A vision that tries to protect inefficient productive systems, which are even more clear in the face of Brazil’s efficiency and sustainable productive systems, which are favoured by inherent advantages, such as climate, land availability and large production of crops such as soy and corn. The realities of Brazilian production cannot be fought with untruths. Specifically, in the case of France, it is a very resistant and protectionist country. I respect the position of France, that the opening will hurt the local industry, but they are wrong, because Brazil’s intention is to complement local production with parts of chicken.In what sense, more clearly, would Brazilian chicken production be positive for the European market and in the case of France, why is the country’s protectionism not good for the chicken meat production chain?There is a logic that is very interesting, for example, to produce 400,000 tonnes of chicken breast, Europe would have to produce another 1.2 million tonnes of chicken meat in total. Europe has no balance for this, mainly because it would generate 800,000 tonnes of thighs and chicken wings, which are not consumed in the domestic market. While these products could be exported to Japan and China, they would face competition from Brazil and the US. And in these large import markets, there is not the same protection that you see in European countries – it is an “open” competition. It would be good for the industry in France and other more protectionist countries to understand that Brazil helps maintain a balance even for the local industry. Brazilian production complements the product that is preferred in France but cannot be met by local producers. Production in the EU is unlikely to compete with chicken production in Brazil, because of the country’s large corn and soybean production, in cheaper production systems, without the use of heating for example. To sell chicken meat to Asia, France would need to buy soybeans and corn from Brazil. These are important points to be raised, where Brazil has a greater intrinsic viability and a great interest in being a partner not only of France, but of other countries of the European bloc, in the supply and food security of the markets that lack certain products. Brazil’s chicken meat industry is scrutinised more than that of all global suppliers, there are 160 countries that make demands on the safety standards of Brazilian production. ‘No borders for food’ – the world still lacks a lot when it comes to food.The UK’s Guardian newspaper recently carried a report on contaminated chicken exports from Brazil. How damaging is this for Brazilian suppliers in the face of the recently concluded EU-Mercosur deal?Regarding the report published by The Guardian, I am firstly surprised that the newspaper has covered such a misleading and malicious report. The problem addressed in the report is about Salmonella spp., which is a generic type that includes over 2,600 variations. According to Codex Alimentarius, there are only two types of salmonella that should not be present in meat, salmonella enteritidis (SE) and typhimurium (ST). Since December 2017, there have been no cases of SE and ST in Brazilian meat exported to the EU, whereas in February, March and April of this year, there were nine cases in European poultry each month – 8 in Poland and 1 in Czech Republic. The other 2,598 types of Salmonella are present in all countries and are killed if the meat is cooked at 70 degrees Celsius. In the case of Brazil, what happens is that if a chicken with Salmonella spp., produced in the country is divided in half and salt is added to one half but not the other, the EU returns the salted meat claiming public health issues. However, if the unsalted half contains Salmonella spp., it is accepted and sold on the EU market. Exports of [unsalted] fresh chicken meat from Brazil are exempt from tariffs only up to the limit of 16,700 tonnes per quota year. Outside this limit, the tariff charged is EUR1,024 per tonne. But for salted meat, a tariff is only charged (EUR1,300 per tonne) if the country exceeds the quota of 170,800 tonnes. So European consumers eat the same meat [in terms of Salmonella risks] as that returned to Brazil, so long as it enters as fresh rather than salted chicken. This shows that the issue is influenced more by the payment of tariffs, than by public health concerns and so is a disguised trade barrier. Public health in Europe has a price and The Guardian has used false rhetoric and sensationalism to erroneously claim that there are problems with meat from Brazil.Regarding ABPA’s new scientific committee, how does it intend to improve the image of Brazilian chicken in Europe?The Independent Scientific Technical Committee will be created by ABPA, with European researchers and one Brazilian researcher, with teachers from major universities. It is part of an image campaign that Brazil has been doing since Operation Weak Flesh [a police investigation into corrupt food safety inspections]. This comes down to misunderstandings generated when Brazilian police released information on the case, which involved plants responsible for just 0.2% of national production and 0.6% of exports, and problems relating to processes rather than products. Brazil has exported 12,000 containers to Europe in the last 10 years and nobody has ever been sick. It is important to note that this Committee is not directly related to the EU-Mercosur FTA agreement nor to the report published by The Guardian regarding cases of Salmonella in Brazil. For the creation of this Committee some analysis was carried out into what Europe wants and what Brazil provides, and the result is that Brazil produces with the same quality as the Europeans, but is infinitely better than the European industry in terms of profitability. Members have been shown how processes work in Brazil and the initial conclusion is that the country produces equal to or better than Europe and with much more sustainability.What are the prospects that the EU will lift restrictions on the Brazilian poultry meatpackers that were delisted last year?These meatpackers are expected to resume exports to the EU countries, as these delistings started from a mistaken premise. Europe has so many misconceptions about Salmonella that they only banned establishments that shipped salted meat, but not those that supplied fresh [unsalted] chicken. If the same company that was exporting salted meat with Salmonella spp. did not add salt to the meat, it could sell. It does not make sense. The main issue is that the Minister of Agriculture, Tereza Cristina and the new administration of the ministry, had a high-level discussion with the European Commission. Although Brazil does not agree and is preparing a WTO panel against the criterion adopted for Salmonella, the country has already made adaptations to what Europe thought should be changed and an action plan has already been sent. We hope that these plants will begin to resume exports by the end of the year.Are agricultural issues a big factor in free trade talks between Mercosur and the European Free Trade Association (EFTA) and in talks with Singapore?Yes, these agreements involve an agricultural agenda as does the one with South Korea and that being finalized with Canada. Mercosur is focusing on regional, multi-place agreements. All involve agriculture to some degree, but the most relevant thing is that these agreements and, very importantly, the agreement with the EU, raise the economic importance of Mercosur as an economic bloc.Will more Brazilian meatpackers be authorised to export to China?Undoubtedly there is a very good chance that more meatpackers will be authorised. We now have a list of meatpackers that are under analysis from China, and we believe that the Asian country will enable a large number of plants, not only from Brazil, but also from other countries. Unfortunately, the effects of ASF in China are devastating and really should begin to be felt in late August, early September, when the Chinese consumers really feel the effects of disease-related culls which should lead to bigger gaps in local meat supplies over the months ahead. In the second semester of this year China should prepare to enable more plants, which are sure to be authorised later this year. This should give a further boost to Brazilian producers, while at the same time putting upward pressure on prices in the Brazilian domestic market.How does Indonesia justify keeping poultry import barriers in place even after losing a case to Brazil at the World Trade Organization?Negotiations with Indonesia began more than ten years ago. Brazil has won a panel at the WTO against the Southeast Asian country, which proves that Indonesia’s measures violate the rules of the institution. Under a sequencing agreement, the country should have made some changes to make Brazilian shipments viable. But Indonesia did not take all actions needed for Brazil to gain access to the licensing system and start exporting. In view of this, Brazil has asked a WTO compliance panel to look into the case. It is hard to talk about expectations for a definitive solution to this issue, but Brazil will continue to push for implementation of the original panel findings, which were supported by many other countries. Indonesians are expected to soon realize that there is complementarity between markets.How important is it to secure market access to Indonesia, a country with 264 million inhabitants?Indonesia has a market that is supply-driven so while claiming to be self-sufficient, they have a very low production in view of the potential of market demand. Indonesia’s poultry industry is very inefficient, generating an expensive product in the local market, which means it is only affordable to small portion of the population. Currently per capita consumption in the country is between 4 and 5 kilos, compared to a world consumption of 22 kilos. There is a great potential to increase this consumption if there were cheaper products available to the population. Opening the market, not only for Brazil, but also to the United States and European countries, would see cheaper products to enter the Indonesian market, boosting local consumption. Specifically, for Brazil, it holds great potential because it is a developing country with growth prospects in a country with the largest Islamic population in the world. As Brazil is the world’s largest producer and exporter of halal meat, this represents a great potential market in the future. Brazil could develop channels of partnership with local industry in order to add value to Brazilian chicken locally since producing in Indonesia is very expensive. Processing in the country may seen favourably as it would generate local taxes and create jobs.