Will Brazil meet our meat standards to strike a post-Brexit trade deal?

Trust is a hard-won thing when it comes to international trade, and at the end of June it appeared Brazil had finally regained it. After years of food safety and corruption scandals in its huge meat sector, the South American giant and its Mercosur trading partners put pen to paper for a trade deal with the EU. However, not even a month after the ink on the deal had dried, fires in the Amazon thrust the country’s food sector back into the spotlight.

Said to have been started by local beef and soya farmers, the fires sparked widespread protests by climate campaigners. And the flames were further fanned by Brazil’s self-styled strongman leader Jair Bolsonaro, whose defence of his country’s activities in the rainforest saw him take on European leaders like Emmanuel Macron with insults and bluster.

The conflict culminated in France, Ireland and Finland threatening to scrap the trade agreement, while Mika Lintilä, the Finnish finance minister, called for an EU ban on Brazilian beef.

In the UK, fast food chains, supermarkets, wholesalers and the Ministry of Defence came under pressure after the Bureau of Investigative Journalism revealed almost £1bn of Brazilian beef had been imported from companies with alleged links to the Amazon fires. Climate campaigners urged the government to put the crisis in the Amazon at the “front and centre” of any trade talks with Brazil, which has expressed an interest in a post-Brexit agreement with the UK.

“If they are currently approved to supply the EU, then they will be approved to supply the UK”

So could Brazil still become a key player in the UK meat sector despite this PR nightmare? What does it have to offer post-Brexit Britain? And are the country’s standards palatable to consumers?

Brazil is a big beast when it comes to the international food trade. It is the world’s largest exporter of chicken and beef, the third-largest exporter of turkey meat and the fourth-largest exporter of pork. And it is determined to build on that position.

Speaking at the SIAVS poultry and pork conference in São Paulo in August, minister for agriculture Tereza Cristina described Brazil as a “great powerhouse of food production”, which has ambitions to expand its export reach beyond the current tally of 160 countries, as well as increasing trade with existing markets.

So far, the Bolsonaro administration appears to be delivering on its promises. The EU-Mercosur trade deal, which marked the culmination of 20 years of negotiations, will see the South American trading bloc benefit from zero or reduced tariff EU quotas for 99,000 tonnes of beef, 180,000 tonnes of poultry and 25,000 tonnes of pork.

While the historic deal has helped extend the new president’s honeymoon period, however, it’s not exactly a game-changer for Brazil, which alone produces a surplus of 1.6 million tonnes of beef and 2.4 million tonnes of chicken for export. So the South American country is looking beyond the EU to other potentially lucrative markets for its meat. And post-Brexit Britain is a particularly attractive proposition.

 

UK consumer attitudes to Brazilian meat

51% do not associate Brazilian beef with being either good quality, safe to consume, farmed to adequate animal standards, farmed in a sustainable way, or trustworthy

65% associate none of the above characteristics with Brazilian chicken

42% associate Brazilian beef with deforestation in the Amazon

50% consider price the most important factor when buying meat products

23% consider animal welfare the next most important

27% always check the origin of their meat product in own-brand products

94% would prefer to buy UK animal products vs Brazilian

Source: Streetbees poll of 1,116 UK consumers

The UK currently produces 68% of the red meat it consumes, according to latest figures from the AHDB. While it is 99% self-sufficient in lamb, chicken is at 78%, beef at 75% and pork at just 57%.

At the moment, the gap is mainly being plugged by the EU. British beef production, for example, is complemented by production from the Republic of Ireland, which exports 210,000 tonnes annually to the UK.

But Brexit is threatening to disrupt the UK’s trading relationship with Europe, potentially opening up new possibilities for third countries such as Brazil - even before new trade deals are signed.

Currently, Brazil exports just 27,000 tonnes of beef annually to the UK, according to AHDB. Of that, 87% is processed products such as corned beef, with just 2% imported fresh or chilled, usually for high-end foodservice.

But that figure could rise dramatically in the event of a no-deal Brexit. In such a scenario, the government says it will impose temporary tariffs on beef that are roughly half of those imposed by the EU, while also introducing a first-come, first-served 230,000-tonne tariff-rate quota open to any country.

The former would reduce imports from the EU, while the latter would increase imports from everywhere else, according to a report by the The Andersons Centre released by AHDB in June. It suggested the new tariff regime could result in a 1,300% surge in beef imports from non-EU countries.

“Brazil would take advantage of the quota arrangement. The domestic beef industry is concerned about it because they think this could happen quite quickly,” says Peter Hardwick, trade policy advisor at the British Meat Processors Association.

“There’s nothing technically stopping Brazilian meat. If they are currently approved to supply the EU, then they will be approved to supply the UK. No one has an answer to that.”

Low prices

Rather than looking to prevent Brazil from taking advantage of post-Brexit quotas, the UK government is actively encouraging a closer trading relationship with the South American country. In August, as the fires raged in the Amazon, trade policy minister Conor Burns announced a £20m programme to help Brazil “boost trade with countries including the UK”.

It’s easy to see why. Brazil accounts for almost 50% of South America’s GDP and is home to more than 200 million people. A post-Brexit deal with the country would provide “significant opportunities for both UK businesses and households”, said Burns as he flew to Rio de Janeiro for trade talks.

For British shoppers, the main opportunity would be cheap meat. Not only does the Brazilian Real compare favourably with the pound, pushing prices down, but the scale of the country’s livestock sector and the cheap cost of labour mean production costs are a fraction of those in the UK and Europe.

Brazil is keen to establish itself as a partner to the UK meat industry, rather than a threat to domestic production. Speaking at the SIAVS conference, Ricardo Santin, executive director of ABPA - Brazil’s pork and poultry industry body, was keen to emphasise his “very good relationship” with British industry bodies like the British Poultry Council and BMPA.

For British meat processors and retailers, buying directly from Brazil after Brexit would help to cut out a costly ‘middleman’, in the form of EU processors, he pointed out. “Do you want to buy from Brazil? Or do you want to pay two tariffs by buying from the EU? We sell to Dutch and German processors who then sell to the UK.”

Production tweaks

Domestic producers aren’t convinced, however, claiming supply shortages could be plugged through tweaks to production methods. “There is capacity to rear more British beef that would displace imported product, no matter where it comes from,” says NFU’s chief livestock adviser, John Royle. “We could be getting another 60,000 to 80,000 tonnes of UK-produced beef from the dairy sector and that could plug the gap.”

But 80,000 tonnes falls well short of the 289,000 tonnes of beef the UK imported last year. And such changes are likely to take years to implement, leaving a considerable gap in the market.

It’s a similar story in pork, where domestic supplies fall significantly short of consumption. If trade with the EU is disrupted, Britain will surely be forced to look to imports from countries like Brazil.

Not least if African swine fever continues to spread through Asia and Europe. Since August 2018, ASF has severely affected pork production in China and has since spread as far as Belgium, with more than 800,000 pigs slaughtered because of ASF in Europe alone, according to Defra figures. In a letter last month, farming minister George Eustice admitted to the National Pig Association that the government anticipates a UK outbreak “within a year”.

South America’s relative geographical isolation from other continents means its production has been shielded from the worst of animal-borne pandemics. Brazil has never registered a case of avian influenza and has so far escaped ASF, a record ABPA chief Santin hopes to uphold. Even if a disease did arrive, Brazil’s regionalisation and compartmentalisation measures are robust enough to allow exports from unaffected areas, he claims.

“There is capacity to rear more British beef that would displace imported product, no matter where it comes from”

But while Brazil can offer a security of supply most European meat producing countries can only dream of, it faces some big challenges.

The first is food safety. In 2017, Brazilian federal police raided 194 locations over allegations that some of the country’s biggest meat processors had been selling rotten beef and poultry. Three meat processing plants were closed and a further 21 were placed under investigation in what was described as a “disaster” by Santin.

An audit undertaken by the EU Commission in 2017 found there were “shortcomings” in key aspects of Brazilian meat control systems, which were not “effective in detecting and acting on significant non-compliances”. Authorities overseeing poultry slaughterhouses approved for EU exports had “failed to ensure” proceedings were supervised by official vets, it added.

As a result of the scandal, the EU temporarily banned some Brazilian meat, as did other importing countries such as China.

In 2018, the Brazilian Department for the Inspection of Products of Animal Origin (DIPOA), responded to the EU audit by announcing it had undergone a full restructuring. It also said it had boosted the number of vets, which “guaranteed the total coverage” of pre- and post-slaughter veterinary inspections.

The EU-Mercosur trade deal suggested Brazil had finally put the scandal behind it. However, in the accompanying literature to the agreement, the EU stressed it was not endorsing all Brazilian meat products. Some restrictions remained in place, it added, and the agreement would “not limit Europe’s ability to resort to [further restrictions] in future”.

And fears over poor Brazilian food safety standards reared their head again in July, when an investigation by the Guardian, Repórter Brasil and the Bureau of Investigative Journalism found 20% of the country’s birds were contaminated with salmonella. That compares with a UK salmonella rate in chickens that ranges between 1.5% and 2.2%.

The ABPA is keen to play down these concerns. Santin claims control and monitoring practices for the bacteria are in place throughout the supply chain and all meat products undergo “pre-export checks” for salmonella.

Brazil has also banned the use of disinfectant such as chlorine for the purpose of carcase decontamination, he adds. “Salmonella prevention and control may be achieved by adopting good agricultural practices.”

Animal welfare

Brazil’s meat industry is also keen to allay fears over animal welfare, poor traceability and the use of drugs in its meat production.

A scathing report by the Irish Farmers’ Association, which inspected Brazilian facilities in 2007, spoke of there being “no cattle tagging whatsoever on the majority of farms”. The IFA also found evidence of “the use of growth-promoting hormones” that are banned in Europe, it claimed.

However, the use of such hormones is now prohibited throughout Brazil, according to the Brazilian Beef Exporters Association (ABIEC). Traceability has also improved, it claims.

“There are an array of challenges that demand constant efforts to ensure product quality and meet all the sanitary demands of our customers,” said ABIEC president Antonio Jorge Camardelli in the organisation’s 2019 Brazilian Livestock Profile report. “One of the pillars of this work is to maintain a reliable up-to-date database, which includes market intelligence, using data obtained from reliable official sources that ensure credibility.”

The poultry and pork sectors offer a similar promise, according to Santin. The integration between producers and processors “assures traceability”, he claimed.

Brazil does permit the use of ractopamine, a controversial feed additive banned for use in pigs in the EU. “Brazil and other countries use ractopamine to improve the pigs’ performance, reducing the proportion of fat on the meat,” says ABPA deputy technical director Sulivan Alves. However, there is “no use of ractopamine in the production of pork exported for those countries for which the ractopamine use is forbidden, such as China and Russia,” he adds.

When it comes to animal welfare, Brazil aspires to meet the requirements of the World Organisation for Animal Health (OIE), which do not contain the specificity of the European legislation the UK currently adheres to.

In terms of beef, the OIE stipulates cattle “should have sufficient space to lie down”, but there is no definition of how much space there should be. Under the Red Tractor assurance scheme, “recommended minimum dimensions” dependent on the size of cattle breed are codified.

For chicken, the OIE standards state there should be “adequate” periods of continuous light, to “allow the broilers to find feed and water”. Red Tractor, meanwhile, specifies a lighting intensity of “at least 20 lux”.

Under OIE, pig producers are permitted to use gestation and farrowing crates but must ensure they are “sized appropriately” with the pig not hemmed in by the crate’s bars. In the UK, farrowing crates are banned and Red Tractor calls for enough room to “allow the sow to lie down and stand up”.

This level of ambiguity in the OIE regulations, matched with ABPA’s admission that welfare is “ruled by private protocols”, suggests welfare varies from producer to producer. However, Brazilian producers say they would promise to adhere to British standards in the event of a boosted import presence to the UK.

“We respect you want to keep production at Red Tractor standard. We have a very good partnership with the UK and we want to keep it,” adds Santin.

Environmental concerns

The most burning issue for Brazil’s meat sector, though, is the negative press around the fires in the Amazon.

Not all aspects of the country’s meat production have been implicated in rainforest destruction. The vast majority of its chicken and pork production takes place in the south of the country, where there is a more temperate climate, according to the ABPA. Likewise, the soya used to feed those these animals is sourced from the area surrounding the farms, says François Gary, partner at French food supply chain consultancy firm Phylum, which is advising the Brazilian chicken and pork industry on breaking into the European market.

“It is an economic nonsense to try to bring it 5,000km from Amazonia,” he adds. “It is easier to send it to the Atlantic ports and export it to another country. The feed is not coming from the deforested area.”

Brazil’s beef sector is also seeking to distance itself from the Amazon fires. ABIEC says it “repudiates any practice that may incur illegal deforestation or burning”. It claims Brazil “has some of the strictest and most stringent environmental laws in the world”.

It’s hard to tell whether Brits would be convinced by such assurances. In a poll of over 1,000 shoppers for The Grocer by Streetbees, 94% said they preferred to buy British, with 42% associating Brazilian beef with Amazon deforestation. However, half (50%) said price was the most important factor when buying meat.

So UK supermarkets and foodservice providers could be tempted to turn to Brazilian imports to keep cheap meat on their shelves after Brexit, admits BMPA’s Hardwick. “I don’t think a switch to Brazilian produce will happen overnight but that doesn’t mean it won’t happen, particularly if people’s pockets are squeezed.”

For now, it seems Brazil will be more constrained by political events than its PR problems. If the UK leaves the EU with a deal, the meat sector would have to wait until the UK and Brazil sign a trade deal to gain improved access. In the event of a no-deal, however, exporters could take immediate advantage of the UK’s revised tariff regime. Which could put more Brazilian meat on our plates within months.

How does Brazil perform on animal welfare?

Brazilian producers say they are committed to producing meat to whatever standards international customers want. However, there are fears post-Brexit trade talks could put pressure on the UK to lower its standards.

“The UK is positioning itself as having the best welfare, standards and quality,” says Soil Association CEO Martin Sawyer. “[But] the pressure to settle trade agreements for the UK is going to be so significant that you cannot see how the UK will avoid compromising.”

World Animal Protection (WAP), which grades countries on their law and policy in relation to animal welfare and standards criteria, gives Brazil a C. That’s not as good as the UK, which gets an A, but it’s better than the US, which has a D.

The issues Brazil faces largely stem from its poor infrastructure. For example, poor road conditions not only extend the time it takes to transport meat from farm to slaughterhouse to processor, but also lead to “high percentages of bruised carcases”, says WAP.

However, the country is not far behind the UK in terms of its protection for animals used in farming - it is given a B-grade compared with the UK’s A-grade. According to WAP, Brazil has “invested considerable attention and resource in improving farm animal welfare”.

And it is not only government laws that are improving. Private firms, which hold a lot of sway on the direction of travel for food standards, are meeting some European standards.

One industry-led example is the use of sow stalls in pork production. According to ABPA deputy technical director Sulivan Alves, companies have been moving away from their use and “transitioning to group house systems”.

Brazil-headquartered JBS, the world’s biggest meat processing firm, announced it had phased out sow stalls 2016. However, while Brazil is on an upward trajectory with its standards, they are not as robust as the EU’s. At the signing of the EU-Mercosur deal, the EU said it would seek “a structured dialogue and exchange of information” on animal welfare but made clear its standards were “not negotiable”. Will the UK, post-Brexit, take a different line? There’s a lot riding on that question.